investors jump back into resources stocks

Investors jump back into resources stocks

23rd August 2008, 16:30 WST

http://www.thewest.com.au/default.aspx?MenuID=33&ContentID=93664





A major turnaround in metal prices pushed up a key commodity index to its biggest weekly gain in more than 30 years yesterday. The rises lifted the market firmly into the black but it nevertheless ended down more than one per cent for the week.

In New York on Thursday the Reuters/Jefferies CRB Index of 19 commodities spiked 3.7 per cent to 405.92 points, marking a 6.2 per cent gain for the week, the most since 1975.

Sentinel Stockbroking chief executive Norman Robinson said the higher metal prices were due to investors seeking a safe haven on the back of lacklustre economic data from the US.

“There was a switch back to the US dollar but economic data during this week has been quite ordinary and so the powers that be are placing the money with the commodities — they see it as a safer bet,” he said. “They probably also see that there’s more growth in the commodity prices, it may be a reflection on the assessment of the strength of China.”

BHP Billiton made one of the strongest gains, climbing $1.20 to $40.15. Rio Tinto jumped $2.10 to $121 and Fortescue Metals Group rose 18¢ to $7.34.

News from Galaxy Resources of increased iron ore potential at its Shoemaker project 120km north-east of Wiluna lifted it 3¢ to 47¢.

Takeover talk sent shares in copper producer Equinox soaring 13 per cent amid speculation it could be in Xstrata’s sights after the mining giant dropped its $545 million bid for Indophil Resources.

Often mentioned as a takeover target because of its recent share price weakness, Equinox jumped 50¢ to $4.18 to cement several strong days of trading. Other potential suitors include OZMinerals, which this week said it was on the acquisition trail, and First Quantum.

In the latest sign that phosphate remains this year’s hot commodity, junior Uramet firmed another 1¢ to 11.5¢, taking its gains for the past two days to 21 per cent after confirming high-grade phosphate mineralisation at its Northern Territory Marqua project. The company has a drilling program planned for the first week in September.

Overall, the S&P-ASX 200 gained 1.15 per cent, or 56.2 points, to 4931.4 and the all-ordinaries index jumped 60.6 points to 5010.2.

After a tame start to the day, the banks made a steady recovery with ANZ firming 8¢ to $15.67, Commonwealth surging 78¢ to $41.38, Westpac gaining 34¢ to $22 and target St George rising 56¢ to $28.71.

Mr Robinson said the market was taking a cautious approach to the banking sector because of concerns surrounding the fallout from Babcock & Brown. “Nobody has yet really quantified just how much the banks have lent to Babcock … there’s certainly concerns that it might fall over and if that was to happen, how many of our domestic banks will be left holding the baby?” he said.

Energy stocks were among the big movers with Woodside soaring $1.85 to $57 and Santos spiking 72¢ to $18.90.

Among WA stocks, Wesfarmers shed 95¢ to $31.95, Clough rose 2¢ to 66.5¢, Macmahon Holdings picked up 8.5¢ to $1.71 and WA Newspapers regained 21¢ to $8.48.

• The Australian dollar closed firmer for the third successive session as speculation the US Government would bail out two mortgage finance giants drove investors away from the currency. At the Perth close the dollar was at US87.55¢ from US87.27¢.