Bipolar market swings up again Oct 20 12:02 Afr Staff And Wires
The Australian sharemarket continued its recent manic-depressive performance on Thursday, bouncing back from near three-month lows after a strong lead from Wall Street.
Leading local gains were the banking leaders and diversified miners, which did the bulk of the damage in Wednesday's sell-off, although oil and gold stocks were among the worst performers after the prices of their underlying commodities slumped overnight.
The benchmark S&P/ASX-200 index was up 23.4 points, or 0.5 er cent, by mid-morning at 4400.6. The market on Wednesday closed at its lowest level since early August on inflation and interest rate jitters.
Underlying the volatility of October have been nerves about high-flying valuations and increasingly hawkish commentary by central banks globally. The broad market is down nearly six per cent since late September.
Providing reassurance overnight was a pullback in oil prices on news of a sharp spike in US crude and gasoline inventories and as Hurricane Wilma steered away from the oil producing and refining regions of the Gulf of Mexico.
On Wall Street, the fall in oil combined with positive earnings to drive stocks up sharply. The S&P-500 registered its biggest point gain in more than half a year, jumping 17.62 points, or 1.5 per cent, to finish at 1,195.76.
The rally came despite another round of jawboning on inflation by senior officials of the US Federal Reserve, which is giving every indication that it has no plans to stop raising interest rates anytime soon.
"Recovering equities and still overall strong commodity markets suggests that there is little broad-based concern that central bank policy tightening will curtail global economic growth and there is still adequate global liquidity chasing higher risk assets and capping risk premiums," said RBC analyst Greg Gibbs.
"Much of this liquidity appears to be coming from China and increasingly Japan where investment trust growth is supplying significant volumes to foreign bonds with little regard to the rising global imbalances that policy makers frequently flag as a risk to the global economy."
Among the stock specific stories locally on Thursday, shares in Origin Energy jumped 23¢, or 3.6 per cent, to $6.66 after the power distribution company raised its earnings forecasts.
Macquarie Bank, which has become increasingly volatile of late, jumped $1.44, or 2.3 per cent, to $64.95 after announcing a deal to buy a British ferry operator for $526 million.
BHP Billiton shares were up 21¢, or 1.0 per cent, at $20.26 after announcing it will more than double production from one of its Western Australian iron ore mines by the end of 2007 at a cost of $US1.3 billion.
On the downside, gold miners slid after the gold price slumped by more than $US7 an ounce to $US464.50 overnight. This added to the woes for Newcrest Mining, which issued a profit warning on Wednesday because of the impurities in the ore at its flagship Telfer mine. Its shares fell another 54¢, or 3.0 per cent, to $17.45.
