Resource stocks drag as index climbs

THE sharemarket closed stronger yesterday as investors snapped up industrial stocks amid renewed hopes for a solution to the European debt crisis.

By InvestSMART · 27 Jul 2012

By InvestSMART ·
27 Jul 2012

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THE sharemarket closed stronger yesterday as investors snapped up industrial stocks amid renewed hopes for a solution to the European debt crisis.

The S&P/ASX 200 Index gained 23.8 points, or 0.58 per cent, to 4147.7.

Burrell Stockbroking senior adviser Jamie Elgar said market gains were across the board, except for the resource sector. "There was a combination of things, with data coming out of China and markets still really looking for some easing, particularly from the US Federal Reserve."

Mr Elgar said markets remained hopeful of a potential bailout for Spain.

"Spain's 10-year bond yield is now in the unsustainable category," he said. "There's a lot of different talk coming out of Europe that maybe Spain needs to have a full bailout, or they're better off doing a euro exit."

The big four banks all closed higher. Commonwealth was in the lead, gaining 55? to $55.41, and Westpac put on 16? to $22.61. ANZ firmed 2? to $22.66 and National Australia Bank was also up 2?, at $23.84.

Goldminers shone in what was otherwise an off day for the resource sector. Newcrest Mining rose 22? to $22.37 after it reported it had exceeded its 2011-12 copper production targets and met its gold production forecast.

At the close of Sydney trade, spot gold was up $US21.42 at $US1606.06 an ounce.

OZ Minerals lost 5? to $7.38 after revealing a sharp quarterly jump in production costs while Energy Resources of Australia lost half a cent to $1.47 after narrowing its first-half net loss.

BHP Billiton closed 12? higher at $30.97 but Rio Tinto fell 50? to $50.51.

Qantas made its biggest gain in weeks, soaring 9.5?, or 9.6 per cent, to $1.08 after the company confirmed it was in talks with several airlines, including Dubai-based Emirates, about potential alliances.

Shares in Wesfarmers rose 27? to $32.25 after it reported a rise in sales at its Coles supermarket division but a 1.8 per cent fall in turnover at retail chain Target and no change at Kmart.

Investors welcomed Caltex Australia's announcement that it would close its Sydney oil refinery and replace it with an import terminal. The shares rose 20? to $14.26.

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Frequently Asked Questions about this Article…

What drove the S&P/ASX 200 higher in the latest market session?

The S&P/ASX 200 rose 23.8 points (about 0.58%) to 4,147.7 as investors bought industrial and financial stocks amid renewed hopes of a solution to the European debt crisis. Market commentators also pointed to incoming China data and ongoing hopes for policy easing from the US Federal Reserve as positive drivers.

Why did resource stocks lag even though the overall index climbed?

Gains were broad-based across the market except for the resource sector. While gold miners performed well, other miners faced headwinds such as rising production costs and company-specific results, which weighed on the sector even as industrial and bank stocks pushed the index higher.

How did Australia’s major bank stocks perform and what were their closing prices?

The big four banks all closed higher. Commonwealth Bank led at $55.41, Westpac closed at $22.61, ANZ at $22.66, and National Australia Bank at $23.84.

What happened with gold miners and the gold price in this update?

Gold miners were a relative bright spot. Newcrest Mining rose after reporting it exceeded its 2011–12 copper targets and met its gold forecast. Spot gold was up US$21.42 to US$1,606.06 an ounce at the close of Sydney trade.

Were there any notable miner-specific results to watch?

Yes. OZ Minerals fell to $7.38 after revealing a sharp quarterly jump in production costs. Energy Resources of Australia edged lower to $1.47 after narrowing its first‑half net loss. Meanwhile BHP Billiton closed at $30.97 higher, while Rio Tinto fell to $50.51.

Why did Qantas shares jump and what does that mean for investors?

Qantas shares jumped to $1.08 after the company confirmed it was in talks with several airlines, including Dubai-based Emirates, about potential alliances. For investors, alliance talks can signal potential strategic partnerships that might improve route networks, revenue opportunities and competitive positioning.

How did Wesfarmers and its retail divisions perform in the report?

Wesfarmers rose to $32.25 after reporting higher sales at its Coles supermarket division. However, its Target chain saw a 1.8% fall in turnover and Kmart reported no change, showing mixed results across the retail portfolio.

What was the market reaction to Caltex Australia’s refinery announcement?

Caltex Australia said it would close its Sydney oil refinery and replace it with an import terminal. Investors welcomed the move and the stock rose to $14.26 on the news.