Shares had a blistering session on Tuesday, gaining $28 billion in value as banks and consumer discretionary plays led the market to its best day of the year.
Investors scooped up financial stocks after a few weeks of savage selling, helped along by news the South Australian Liberals will block the state’s bank levy.
ASX winners and losers – a snapshot
The stand out listings traded on the ASX captured at key moments through the day, as indicated by the time stamp in the video.
Positive leads from international markets, rises in commodity prices and a seasonal July boost all prompted investors to push the benchmark S&P/ASX 200 Index up 1.7 per cent to 5783.8 points, its biggest one-day gain since early November.
The Reserve Bank of Australia’s decision to keep interest rates at 1.5 per cent did little to interrupt the day’s euphoria on the sharemarket. But the RBA’s reluctance to flag an end to ultra-low rates – as several of its global peers did last week – weighed on the Australian dollar, which tumbled by about three-quarters of a cent to US76.08¢.
Among the banks, Commonwealth Bank jumped 1.9 per cent, National Australia Bank was up 2.8 per cent, Westpac enjoyed a 3.3 per cent lift and ANZ closed 2.2 per cent higher.
While Tuesday’s euphoria certainly favoured financials, analysts were doubtful the rally in the big four would last.
“While we remain positive on the banking sector as a whole, we believe (banking regulator) APRA is on the verge of introducing what should constitute “unquestionably strong” capital requirements,” said TS Lim, equities analyst at Bell Potter.
Regional banks also enjoyed Tuesday’s positive mood, with Bendigo Bank rising 2.9 per cent and Bank of Queensland closing 2.3 per cent higher.
Apart from gold stocks, the ASX enjoyed a broad-based rally, with only 16 out of the top 200 stocks ending in the red.
Stronger-than-expected retail sales numbers sparked appetite for consumer discretionary stocks, which have been under pressure in recent months as investors weigh up the imminent Amazon threat and as wages growth remains sluggish.
Specialty Fashion was up 8.7 per cent, Harvey Norman and JB Hi-Fi traded 5 per cent and 5.3 per cent higher, respectively, while Myer closed up 3.6 per cent.
Dips in the price of iron ore and oil prices did little to dampen enthusiasm for BHP Billiton and Rio Tinto, with the two resource giants closing 2.3 per cent and 0.8 per cent higher, respectively.
Stock Watch: Ardent Leisure
Investors in Ardent Leisure got some good news on Tuesday, when the embattled theme park operator revealed a company associated with Malaysian billionaire Seng Huang Lee had purchased a 5.3 per cent stake. Shares in Ardent Leisure bumped up 7.9 per cent to $2.04, well above the $1.85 consensus 12-month price target of analysts, most of whom maintain either ‘holds’ or ‘sells’ on the stock. The Malaysian tycoon, who also holds a large shareholding in listed retirement village company Aveo, is also, through another company, the current employer of former Ardent boss Greg Shaw, who was controversially replaced by magazine publisher Deborah Thomas 2013, causing a share price tumble at the time. Ardent’s share price took another hit in late June, when it lowered its full-year guidance.
The Australian dollar tumbled more than three-quarters of a cent to just above US76¢ after the RBA stuck with a neutral outlook for interest rates, wrongfooting speculators wagering it would take a hawkish turn on policy as other central banks have done over the past weeks. Not following other central banks down a premature hawkish tilt was a good move, said AMP Capital’s Shane Oliver. “Quite clearly the RBA remains concerned that ‘an appreciating exchange rate would complicate’ the adjustment in the economy post the mining investment boom and adopting a hawkish tilt now would only have added to this concern.”
Bank of Canada
While the RBA resisted calls to flag an end to easy money, investors are betting the Bank of Canada will be next in line to raise interest rates. BoC governor Stephen Poloz last week caused plenty of ripples, and a surge in the loonie, when he suggested the bank could tighten policy as early as this month. In an interview on Tuesday, he added central banks shouldn’t necessarily wait for inflation to hit the levels they like before starting to tighten monetary policy. Market pricing of the chances of a rate hike at next week’s BoC meeting has jumped to above 80 per cent.
Retail sales rose three times more than was forecast in May, a sign consumers are weathering for now weaker wages growth. Turnover rose 0.6 per cent from April, when it surged by 1 per cent. Economists had anticipated a 0.2 per cent gain. The growth was led by a 2.2 per cent increase in spending on household goods, while department store sales were down 0.7 per cent. The strength in the retail market is good news for the RBA, which had been fearing that consumers are shying away from spending because of rising household debt and soft wages growth.
Wall Street’s Dow Jones index hit a new intraday high in a shortened session on Monday, with sentiment lifted by strong economic data. US factory activity jumped in June to its highest level in almost three years suggesting economic growth in the second quarter gained some steam, while construction spending held steady in May. Investors also sold bonds and bought the US dollar on the data. The release “supports our view that annualised GDP growth has rebounded quite strongly in the second quarter,” Capital Economics economist Andrew Hunter said.
By Jessica Sier – Article Source: Smh.com.au