Market closes up strongly

Published in the West Australian, August 2011

Miners took over from financials in leading the Australian sharemarket recovery bounce today, boosted by better-than-expected Japanese June quarter GDP data.

The S&P/ASX 200 index climbed 110.3 points, or 2.64 per cent, to 4282.9 points as base metal prices firmed following the release of the Japanese data.

The broader All Ordinaries index was 108.9 points, or 2.57 per cent, stronger at 4346.8.

The Japanese economy slowed at an annualised minus 1.3 per cent against consensus forecasts of minus 2.5 per cent as reconstruction work to repair the earthquake and tsunami damage began to support the ailing economy.

Asian markets were also buoyed by the strong rally in European stocks on Friday following the banning of short-selling of financials stocks, mostly on peripheral nation bourses such as Italy and Spain.

US markets also finished firmer despite the plunge in August consumer confidence to a 31-year low, with investors preferring to focus on the July retail sales growth of 0.5 per cent which met consensus forecasts. 

Analysts warn of the gaping divergence over the past two years between consumer confidence and retail sales which were closely correlated for the previous 13-years.

The Australian dollar rose to a high of $US1.0435, as uncertainty in currency markets from central bank intervention to curb safe-haven demand for the Swiss franc and the yen left the US dollar mixed against major currencies. The Swiss franc fell 2.4 per cent against the euro.

With investor jitters easing gold continued to lose ground, sliding $US10 to $US1742 an ounce.

Copper rose as much as 1.2 percent to $8,973.25 tonne on the London Metal Exchange, before slipping back to $8930.

Japan's Nikkei index gained 1.4 per cent and the Shanghai composite index was up 1.1 per cent at the close of the ASX.

Wealth Within analyst Janine Cox said the gains were the result of institutional and speculative trade following a week of panic in the markets.

"The institutionals trade with algorithms, so they'll have a lot of computer algorithms sitting there waiting to pick up the stock when they hit a certain price.

"A lot of that can cause a rebound, plus you get a lot of short-selling because of the spring back into the market," she said.

Cameron Securities client adviser Adrian Leppinus said investors were quick to pounce on positive profit results at the start of the reporting season.

Condom and glove maker Ansell gained 54 cents or 4.1 per cent to $13.68 after it announced a 2.7 per cent rise in full year profit to $122.7 million and forecast that earnings per share would rise as much as 12 per cent this financial year.

Among the miners, BHP Billiton was up $1.64, or 4.3 per cent, at $39.85 and Rio Tinto up $3.00, or 4.2 per cent, at $74.52.

Property and construction group Leighton Holdings was up $1.64, or 8.26 per cent, at $21.49 after saying it is confident of turning a $1 billion full year profit within five years after reporting on Monday a previously flagged loss of $408.8 million.

The banks were mixed, with National Australia Bank 61 cents higher at $23.57, Westpac up 70 cents at $21.17, and ANZ gaining 73 cents to $20.65.

Commonwealth Bank lost $1.18, or 2.4 per cent, to $47.38 after going ex-dividend.

Gold miner Newcrest Mining shares was down 33 cents at $40.40, even though it reported a 63 per cent lift in full year profit.

Preliminary national turnover was 1.97 billion shares worth $5.63 billion, with 770 stocks up, 317 down and 315 steady.

On the ASX 24, the September share price index futures contract was 123 points higher at 4262, with 45,541 contracts traded.