Bargain hunters boost stocks

The Australian share market closed higher today as investors snapped up stocks that now look cheap after being beaten down by higher oil prices, the global credit crunch and fears of economic slowdown.

The major banks and most stocks in the financial services sector made decent gains.

The benchmark S&P/ASX200 index gained 79 points, or 1.6%, to 5011.9, while the broader All Ordinaries added 67 points, or 1.33%, to 5089.4.

The September share price index futures contract was up 53 points to 5014 on a total volume of 25,584 contracts, according to preliminary calculations.

Austock senior client adviser Michael Heffernan said the market was "a little more spritely'' today after a positive lead from the US overnight.

"The banks are performing exceedingly well, and stocks that have been belted down are staging a bit of a resurgence today,'' Mr Heffernan said.

He said there was no question that stocks were looking cheap.

"The banks now have P/E (price to earnings) ratios and dividend yields almost the same - that's got to be the most compelling attraction of the banks since the the early 1990s.''

Nonetheless, volatility remained the byword for the market and today's happiness could be followed by gloom tomorrow.

Among the major banks, NAB gained $1.25 to $27.60, ANZ put on 20 cents to $18.80, Commonwealth Bank strengthened 76 cents to $41.49 and Westpac firmed 17 cents to $19.69.

Elsewhere in the financial services sector, Insurance Australia Group lost 1 cent to $3.66 as it slashed its final dividend and said it would wind back its British operations.

AMP was up 11 cents to $6.68 and Axa Asia Pacific rose 21 cents to $4.75.

In the resources sector, global miner BHP Billiton gained 48 cents to $39.98 but Rio Tinto fell 30 cents to $123.15.

Oil and gas producer Woodside Petroleum was 55 cents richer at $59.22 and Santos fell 10 cents to $18.70.

AGL Energy jumped 52 cents to $14.32 after it acquired a 9.99% stake in Torrens Energy and entered into an alliance with the geothermal exploration company to commercialise geothermal projects.

On Wall Street overnight, the Dow Jones Industrial Average jumped 152.25 points to 11,384.21.

In the gold sector, Newmont dipped 7 cents to $5.01, Lihir was steady at $3.02 and Newcrest ascended $1.91 to $29.55.

The price of gold in Sydney at 4.23pm was $US922.25 per fine ounce, down $US6.05 on yesterday's close of $US928.30.



Telco Telstra was up 17 cents at $4.45 and Optus-owner Singapore Telecommunications was up 4 cents at $2.72.

In the retail sector, Wesfarmers, which owns Coles, improved 48 cents to $34.71, and Woolworths was 71 cents richer at $25.11.

Among media stocks, News Corp was 53 cents heavier at $15.87, and its non-voting stock added 53 cents to $15.61.

Consolidated Media nudged up 1 cent to $3.20 and Fairfax rose 8 cents to $2.93.

Among other stocks, grocery wholesaler Metcash was off 2 cents at $3.83 after the competition watchdog said it had some preliminary concerns about Metcash's proposal to buy the Symbion pharmacy distribution business from Primary Health Care and enter into a logistics joint-venture with Sigma Pharmaceuticals.

Primary fell 32 cents to $4.50 and Sigma lost 2 cents to $1.03.

Property trust GPT Group lost 14 cents to $1.73 as it said finance costs tied to the changes in its credit ratings had been accounted for in the downgraded underlying guidance that it issued earlier this week.

Engineering service provider Downer EDI was up 15 cents at $6.20 after winning more than $800 million of contracts over recent months.

Theme park and cinema operator Village Roadshow hovered at $2.20 after it expanded its footprint in the US, taking control of a water park in Phoenix, Arizona.

The top-traded stock by volume was gemstone producer Cluff Resources, with 82.26 million shares worth $1.93 million changing hands. Cluff was 0.3 cents higher at 2.4 cents.

Preliminary national turnover was 1.57 billion shares worth $6.08 billion, with 538 stocks up, 615 stocks down and 324 unchanged.