TH: Stocks up after Wall St rises on Greek bailout
THE Australian sharemarket remained firm before the weekend, with financials and industrial stocks leading broad gains after Wall Street rose on strong results from Morgan Stanley and an EU agreement on fresh financial aid for Greece.
Austar plunged after the Australian Competition & Consumer Commission said a proposed $2.5 billion takeover bid by Foxtel would substantially lessen competition in a number of areas, making it highly unlikely the deal will proceed.
The benchmark S&P/ASX 200 closed up 1 per cent at 4602.9, after hitting a nine-day high of 4612.2.
The index was capped by a downtrend line drawn from the April 11 peak. A potential double-bottom trigger point was located at 4657.4, according to Dow Jones Newswires technical analysis.
On Wall Street, the S&P 500 rose 1.4 per cent, with Morgan Stanley up 11 per cent after second-quarter revenue beat market expectations by about 16 per cent. The Wall Street Journal also said President Barack Obama and House Speaker John Boehner were moving towards a deficit-reduction deal, although with prospects of a US government default looming in early August, leaders on both sides denied that a deal was close.
"There's certainly a bit more confidence around in the wake of the EU deal on Greece," Macquarie Private Wealth investment adviser John Milroy said. "We are seeing a relief rally in financials."
In the past week, the S&P/ASX 200 hit a 10-month low of 4445, before rising as much as 3.8 per cent. Some traders are expecting further dips below 4500 in coming weeks. "I'm certainly not of the opinion we are out of the woods just yet," RBS head of domestic sales trading and execution Justin Gallagher said. "While everyone's happy to see an agreement on the European debt crisis, that situation has hardly been resolved."
In the financial sector, Macquarie Group rose 3.3 per cent and major banks rose 1.6 per cent to 2.5 per cent.
Among industrials, ConnectEast, which operates the Eastlink tollway in Melbourne, rose 20 per cent to 54c after recommending a takeover proposal from Horizon Roads, ConnectEast's largest security holder.
Materials underperformed, with BHP Billiton down 0.3 per cent after London Metal Exchange copper fell 0.8 per cent, and Newcrest was down 1.4 per cent after Royal Bank of Scotland downgraded the miner to hold.
Austar fell 16 per cent to $1.08 after hitting a four-month low of $1.03, following the preliminary ruling against Foxtel's proposed bid.
Banks and financials had a strong day, with National Australia Bank the biggest mover, up 62c, or 2.52 per cent, at $25.22. Commonwealth Bank was up 78c, or 1.57 per cent, at $50.52, following the appointment of CBA senior executive Ian Narev as its new chief executive, to replace Ralph Norris. ANZ added 47c, or 2.21 per cent, to $21.73, while Westpac was up 46c, or 2.18 per cent, at $21.60.
UBS analysts warned that with demand conditions still subdued and the Australian dollar elevated, the risk to Australian earnings was skewed to the downside going into the August reporting period. But the broker noted that equity prices had generally been weak due to a combination of rising global risk aversion and concern about the risk to earnings.
