Australian stocks end the week 2% higher
The Australian share market climbed 2% this week, its second consecutive weekly increase, although the gains may be short-lived as market volatility continues to prevail.
The benchmark S&P/ASX 200 index rose 99.4 points over five days to 5,170.5, but was still down 0.7% so far this month from the end of August.
Early this morning Sydney time, the US Federal Reserve announced its decision to keep interest rates unchanged at 0 to 0.25% on concern the global economy is slowing, particularly in China.
“If the Fed had raised rates, it would have indicated to the markets that they were confident enough that the economy had established enough momentum to be able to deal with a rate rise,” said CommSec market analyst Tom Piotrowski.
“So that was a little bit disappointing, and that really sort of highlights that we are looking at a global picture where there are still a lot of risks pointed towards the downside.
“I think you need a couple of days to see how this situation [US rate decision] is going to pan out. In the broader picture, the markets still appear to be on quite an uncertain footing,” he stated.
Market volatility and the Aussie dollar
The S&P/ASX 200 VIX index, which measures market volatility and investor sentiment, was at 23.32 today. That reading showed investors had a negative outlook on the share market for the next 30 days.
“A big issue at the moment continues to be how the Chinese market is trading. That arguably is one of the main influences for global markets. If you see the Chinese stock market substantially lower on any given day, that would likely knock on through European and US markets as well,” said Piotrowski.
Following the Fed’s rate decision, the Australian dollar had rallied 0.8% to 72.26 US cents at around 4:40pm AEST, taking the weekly currency gain to 1.9% so far.
The absence of a US rate hike is generally positive to the Australian dollar, as it allays worries that any subsequent rises in the US dollar could further squeeze the value of the local currency.
What makes the Australian dollar move?
In addition, the leadership transition in Australia’s Liberal Party earlier this week, which saw Malcolm Turnbull succeed Tony Abbott as the nation’s new Prime Minister, was seen as supporting the Australian dollar’s gain on Tuesday.
Veda jumps on takeover offer
Shares of Veda Group (ASX: VED) surged 31% today to $2.62 after the company received a takeover proposal from Equifax Inc of $2.70 cash per share, Veda said in a statement today.
Meanwhile, over the week, Macquarie (ASX: MQG) advanced 3.8% to $78.71, after chief financial officer Patrick Upfold told investors the company expects a 40% increase in earnings for the six months to 30 September.
Woodside Petroleum (ASX: WPL) gained 4.5% to $29.69 after Oil Search (ASX: OSH) rejected its takeover proposal. Morningstar said Woodside risked undermining its strong balance sheet if the deal went through due to inherent risks in Oil Search’s gas project in Papua New Guinea.
G8 Education (ASX: GEM) dropped 3.3% over five days to $3.19 after losing to private equity firm Anchorage Capital Partners in an attempt to acquire childcare operator Affinity Education (ASX: AFJ).
Affinity however added 4.1% to 89.5 cents after Anchorage improved its cash offer to 92 cents per share from 90 cents.