Banks back in favour as market posts solid gain

The sharemarket closed stronger yesterday, with positive gains from the banks driving the local index into higher territory.

At the close the benchmark ASX 200 index was up 69.2 points, or 1.32 per cent, at 5307, while the broader All Ordinaries rose 58.4 points, or 1.09 per cent, to 5421.5.

"The gains have been driven mainly by the financials, which are back in favour today,

" said Dominic Vaughan, a dealer with CMC Markets.

"There is, however, still inherent risk within this market and you may see a short-term correction. There is probably limited upside at this stage, but it will only be a correction rather than a change of trend."

Shares in the four biggest banks rose, Commonwealth Bank by $1.96 to $40.90, ANZ 38c to $19, National Australia Bank 66c to $28.06 and Westpac 84c to $21.39.

The Commonwealth said it expected slowing demand for credit cards to continue as cost pressures curbed consumer spending.

Takeover target St George Bank also rose, up $1.18 to $28.90, after it said it was on track to meet its earnings growth target for this financial year and its credit quality remained strong.

The market got off to a strong start after a positive lead from Wall Street overnight, with the Dow Jones adding 4.4 points to close at 11,811.83.

The retailers were mixed, with Woolworths rising 41c to $24.53, Wesfarmers up 13c at $37.42 and Harvey Norman ahead 18c to $3.20, but David Jones dipping 1c to $2.90.

Futuris rose 22.5c to $1.195 after chief executive Les Wozniczka quit, saying he had lost the support of investors following a profit downgrade that punched a hole in the diversified agribusiness group's share price.

The business software developer MYOB fell 13.5c to $1.215, after appointing the founder Craig Winkler to the new role of chief innovative officer to focus on developing products and services.

IBA Health dipped 0.5c to 59.5c, despite saying it was on track to meet its 2008 financial year earnings guidance while revealing it would soon release its Lorenzo software in Australia.

Media stocks were stronger, with Consolidated Media rising 9c to $3.35, News Corp ahead 52c to $17.68 and its non-voting shares adding 56c to $17.26, and Fairfax rising 9c to $2.91.

BHP Billiton rose 23c to $43.95, and Rio Tinto fell 32c to $136.18.

In the energy sector, Woodside Petroleum rose 3c to $66.41, Santos fell 70c to $21.15, and Oil Search dropped 3c to $6.40.

Gold was slightly lower at $US886.90 an ounce, down US70c. That left gold-miners mixed. Newcrest rose 30c to $25.90, Newmont fell 7c to $5.23, and Lihir fell 8c to $3.02.

Telstra was the most traded stock, with 82.1 million shares changing hands. It put on 7c to $4.41.