Tuesday, May 11, 2010

Eurozone bailout lifts Oz market

The Australian sharemarket closed sharply stronger on renewed investor confidence after a crisis package was agreed to help bail out troubled eurozone economies.

Brokers said bargain hunters bought into market-leading resource and banking sectors, in contrast to Friday's sharp selloff that capped five consecutive trading days of losses.

The benchmark S&P/ASX200 index gained 119.1 points, or 2.66 per cent, to 4599.8, while the broader All Ordinaries index added 114.8 points, or 2.55 per cent, to 4622.2 points.

On the Sydney Futures Exchange the June share price index futures contract was 145 points higher at 4619 points, on a volume of 57,580 contracts.

The announcement in Europe of a €750 billion ($1.34 trillion) package of crisis aid for troubled eurozone countries boosted sentiment from the local market's opening.

Sharp rises in the big mining and banking stocks may have also been as much a result of investors buying stocks that had been cheapened by the severe falls on the market last week, RBS Morgans private client adviser Bill Bishop said. "Investors think the two huge mining companies got pretty cheap, and that probably accounts for it as much as anything," he said.

BHP Billiton gained A$1.50, or 4 per cent, to A$39 and Rio Tinto added A$3.82, or 5.88 per cent, to A$68.80.
A lot more explanation was needed on how the European package would work before confidence could be restored in the global economy, Bishop said.

"The market is assuming it is all fixed, on the other hand the reports I have seen suggest it only looks like it has been all fixed," Bishop said.

"I think the Dow Jones futures have helped and the market is wishing desperately to believe that the Europeans are going to fix their problems."


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