Long Bonds Push Shares Up

The Age

Tuesday March 11, 1997

DAVID SAUNDERS

Long bonds had their strongest day in three months yesterday, pushing the sharemarket ahead, led by the banking and retail sector.

On a subdued day of trading affected by the Victorian Labor Day holiday, the All Ordinaries jumped 23.4 points to close at 2461.9, on thin turnover.

Brokers said bonds, which had their biggest daily gain since the Reserve Bank's last round of interest rate cuts in December, were the main influence on the market.

Yields on benchmark November 2006 Commonwealth bonds fell 13 points to 7.79 per cent. At the shorter end, April 2000 bonds fell eight points to 7.06 per cent.

Dealers said that last week's heavy falls, as well as a positive lead from the United States bond market after strong employent figures were announced on Friday, lured back buyers.

The March contract on the Share Price Index also powered ahead, gaining 32 points to 2460, with more than 7200 lots traded.

Banks rose in line with the bond market's recovery, after their mauling last week. National Australia Bank performed best, rising 23 cents to $16.18, after reaching a high of $16.30, while Commonwealth Bank added 18 cents to $13.24.

ANZ closed eight cents higher at $7.80 and Westpac added nine cents to $7.14.

The Retail Index also maintained its momentum, closing another 52.9 points, or 1.8 per cent, higher at 3064.8.

The real test for the sector comes this week when both David Jones and Coles Myer report their half-year results.

Yesterday's closing reflected divergent forecasts for the two. Coles Myer closed 11 cents higher at $6, as expectations of a good result on Thursday heightened. David Jones, which reports tomorrow, fell one cent to $1.71 before the announcement that its chief executive, Mr Chris Tideman, had resigned.

Woolworths, which last month started the retail ball rolling with an 8.62 per cent interim net profit rise, closed 10 cents higher at $3.71.

Building stocks, led by Boral, continued to bound along as belief in an upswing in the economy gathered strength. But one research adviser said the market's reaction in recent weeks suggested investors might have jumped the gun, leaving some leading stocks in danger of being overvalued.

The relentless climb by Boral, a company that announced a 20 per cent slump in net interim profit only last week, has been the vanguard of the recovery. Yesterday it closed another 7.4 cents higher at $3.88. Also up was CSR, which gained 14 cents to $4.95, while Pioneer was steady at $4.20.

On a positive day for the market, Crown remained in the investor doghouse, losing four cents to $1.96, as negative sentiment about cost and the delayed opening of Melbourne's permanent casino, as well as last week's ill-received $185 million renounceable rights issue, again plagued the shares.

The one-for-six rights issue will debut on the market tomorrow.

The dollar closed slighly weaker at 78.65 US cents, trading in a thin range and looking for moves in commodity prices and direction from offshore investors.