Blue Chips Lead Rise But Bonds Tempt Investors

Sydney Morning Herald

Tuesday June 8, 1999

By MARK TODD

Leading blue chips, in particular NAB, pushed the sharemarket to a moderately higher close yesterday as investors welcomed stronger commodity prices and expressed relief at the issue of benign US employment data.

The All Ordinaries rose 14.8 to 2944.1 after Wall Street climbed 136 on Friday to 10,799 when US non-farm payrolls figures weren't as strong as feared, easing concerns of a near-term rise in US interest rates.

After the market spent last week on edge "there was a lot of relief that the US market went up and that flowed through to us", said Mr Michael McCormick, an adviser at ANZ Securities.

However, the market's showing was far from decisive.

Ten-year bonds are offering an increasingly attractive alternative to shares, brokers said.

Also, there are lingering fears of a rate hike in the US that would in turn affect the worth of Australian shares.

"It will be difficult for our market to go much higher with yields at 6.2 per cent," Mr McCormick said.

"It's still a big hurdle to get over."

He added that with little domestic data due out, investors would likely sit tight and wait for the issue of US inflation data later in the week.

"If there is confirmation that inflation is creeping in, it won't be good for the markets," McCormick said.

Stronger base metal prices in London boosted mining companies with WMC rising 12c to $6.13, BHP 9c to $16.40, and Pasminco 3c to $1.60.

Gold companies, however, continued to battle a weak gold price which is hovering around 20-year lows.

Newcrest Mining fell 7c to $3.11 and Normandy 2c to $1.06, although Acacia Resources increased 2c to $1.56.

"Metals, with the exception of gold, were stronger and that gave encouragement to the equity funds to continue reweighting towards resource stocks," said Mr John Watson, portfolio manager and strategist at State Street Global Advisors.

NAB was the most active stock by value and rose 65c to $26.60, while CBA rose 40c to $25.26.

However, ANZ fell 32c to $10.86 after paying out a 26c dividend.

Westpac dropped 19c to $10.09 on speculation that it might revisit an unpopular plan to buy BT Australia.

"It looks as though there might have been a bit of switching out of Westpac and ANZ back into NAB and CBA," Mr McCormick said.

Coca-Cola Amatil rose 11c to $6.50 after San Miguel rejected a report it was considering selling its 22 per cent stake in the company. San Miguel said it saw "significant" long term value in Coca-Cola Amatil and had no intention of selling "at this time".

Elsewhere, David Jones gained 2c to $1.55 on higher than usual volume of 3.2 million shares. Major telecommunications companies were mixed, with Telstra 2c higher at $7.63 and Optus 7c at $3.01 but AAPT down 18c at $4.80. Brokers attributed the selling in AAPT to investors offloading interests when an anticipated bidding war for the company didn't eventuate. Optus strengthened on talk that it might soon clinch a deal with ecorp, involving Optus's broadband cable network.