Interpac Business and Migration Solutions Melbourne Australia

(September 27,2011)

Australian stocks have posted their biggest one-day gain in nearly three years, rebounding strongly on hopes that European officials would find a way to cut Greece's debt and shore up European banks.

At the close, the benchmark S&P/ASX200 index was up 140.7 points, or 3.6 per cent, at 4004.6, its biggest one-day gain since late November 2008, while the broader All Ordinaries index jumped 135.9 points, or 3.5 per cent, to 4063.5.

The rise added about $40 billion in value to the local market.

The Aussie dollar also benefited from the resurgence of risk appetite, rallying to 98.77 US cents, up from 96.47 cents late yesterday.

Euro-zone officials are working to magnify the firepower of the region's rescue fund and have begun discussing the next steps to shore up the financial system and prevent the crisis from derailing a fragile world economic recovery.

"There are much more positive signs coming out of Europe, and once we can quantify the actual exposures [of the banks], the markets will draw more comfort. It is the uncertainty that has really affected the markets," said CMC Markets analyst Michael McCarthy.

more to come

From an earlier report: But analysts said there was still plenty of scope for disappointment if policymakers did not resolve liquidity and solvency issues in Europe.

"It's a knee-jerk reaction to the world failing to come to an end last night," said E.L. & C. Baillieu Stockbroking director Richard Morrow. "It is a reversal and I don't see it lasting. The market has been as gloomy as I can remember since the last days of 2008."

Sharemarkets across the region were also on the rise. MSCI's broadest index of Asia Pacific shares outside Japan rose 1.5 per cent, after plumbing its lowest levels in 16 months on Monday, while Tokyo’s Nikkei index gained 1.5 per cent in early trade.

Gold continued its run of bad form, however, capping the biggest three-session slump since 1983, but it was not alone. Copper fell below $US7000 a tonne for the first time in 14 months and aluminium hit a one-year low.

Miners lead market

Materials, which closed 3.9 per cent lower yesterday, were leading the local market at midday, trading 4 per cent higher, while gold miners jumped 5.3 per cent.

Mining giant Rio Tinto gained $2.89 to $63.09 after it increased its stake in Canadian miner Ivanhoe Mines to 49 per cent while fellow miner BHP Billiton rose $1.10, or 3.2 per cent, to $35.05.

CityIndex chief market analyst Peter Esho said that despite wide-ranging scepticism the market’s rebound looked quite convincing as materials stocks made back some of their losses of the past few days.

‘‘Commodity prices have stopped falling at the moment, silver and gold prices bounced, copper is holding stable, so it looks like those material stocks are somewhat bottoming, and, perhaps, there’s some short covering also,’’ he said.

Australia’s biggest gold miner Newcrest Mining, which was the worst performer among the top 50 companies yesterday, rose $1.52, or 4.6 per cent, to $34.38.

The spot price of gold in Sydney was $US1,627.8 per fine ounce, up $US60.98 from Monday’s close.

Mr Esho said that despite broad-based gains across all sectors, investors were still highly selective and cautious about overseas markets.

‘‘I think if we can hang on to these gains it’ll be quite a strong signal for the market that we have, perhaps, bottomed but we will also continue to take offshore leads throughout the week,’’ he said.

The local financial sector was also 3.5 per cent higher, with all the major retail banks gaining ground. National Australia Bank was the strongest performer, up 4.8 per cent to $22.17.

Making news, Telstra rose 2 cents to $3.06 after it announced it was launchings 4G mobile network, which would enable access to some of the fastest mobile download and upload speeds available anywhere.

Virgin soars

Shares in Virgin Australia rose 1.5 cents, or 4.8 per cent, to 32.5 cents after Air New Zealand has increased its stake in the airline to boost its reach and earnings but reaffirmed it does not plan a takeover.

Food manufacturer Goodman Fielder shares remained in a trading halt after it announced plans to raise $259 million through a share issue to bolster is balance sheet.

Source from Theage.com.au