The Australian share market has jumped nearly two per cent to a new high for 2016, boosted by investors looking for bargains among the big banks, and a cut to interest rates.
CMC Markets’ Michael McCarthy said the local bourse had powered ahead on Tuesday as investors supported the banks despite a weak earnings result from the ANZ bank.
Also investors were buoyed by the Reserve Bank of Australia’s cut to interest rates.
“Even before we heard from the RBA today, there was very good support in the market for the banks and that came as a surprise for a lot of traders, particularly after that weak ANZ result,” Mr McCarthy said.
“It’s clear that the adjustment to their share price that’s gone on over the last 12 months was in anticipation of exactly this sort of result, and there’s clear evidence that some people see value in the banks at current levels.”
The market picked up even more after the RBA cut the cash rate by 25 basis points to a record low of 1.75 per cent.
“Clearly an easier interest rate environment was not fully priced into the market, and that’s what’s given this last leg up,” Mr McCarthy said.
Among the major banks, ANZ was $1.32, or 5.56 per cent, higher at $25.05 despite reporting a 24.3 per cent drop in first-half cash profit result and slashing its interim dividend.
Westpac, which disappointed investors with its earnings report on Monday, was up 70 cents at $30.65, National Australia Bank rose $1.00 to $27.63, and Commonwealth Bank improved $2.68 to $75.02.
In the resources sector, global miner BHP Billiton was off 19 cents at $20.73, Rio Tinto fell 65 cents to $51.75, and Fortescue Metals retreated 11 cents to $3.29.
Supermarket operator Woolworths added two cents to $22.27 despite its hefty investment in lowering grocery prices failing to show any sign that business is turning around.
Sports retail group Surfstitch plummeted 55.5 cents, or 53.62 per cent, after it projected an earnings drop of at least 61 per cent in the 2016 financial year.
KEY FACTS:
* On Tuesday, the benchmark S&P/ASX200 index was up 110.8 points, or 2.11 per cent, at 5,353.8 points.
* The broader All Ordinaries index was up $1.03 points, or 1.94 per cent, at 5,415 points.
* The June share price index futures contract was up 132 points at 5,355 points, with 52,756 contracts traded.
* The price of gold in Sydney at 1700 AEST was $US1,300.12 per fine ounce, up $US6.92 on Monday’s price of $US1,293.20.
* National turnover was 3.2 billion securities traded, worth $7.3 billion.
