We finished the week up a whopping 64 points (+1.4%) at 4655.
Investors received some relief in the form of the RBA’s decision to keep interest rates on hold and positive jobs data.
The materials sector led the gains with the big miners firing.
Murchison Metals (ASX:MMX) was one of the worst performers of the week, dropping nearly 10% after announcing a delay and cost blowout at its project.
The airlines stocks flew as Qantas (ASX:QAN) and Virgin Blue (ASX:VBA) took advantage of Tiger Airways’ demise.
The big four banks were mostly weaker with only National bank (ASX:NAB) gaining ground, up 1%.
Economic News. What Does it Mean?
There was plenty of economic action last week, mostly concerning jobs and interest rates.
The action started on Monday with job ads, which were up 3.7% in June, recovering from a 6.5% drop in May.
The positive news was outshone by retail sales numbers, which dropped 0.6% in May, massively disappointing the market which had expected a 0.3% rise.
The market and the Aussie dollar fell on the news, as investors virtually wiped out all chance of a rate rise the next day.
As expected, the RBA kept interest rates on Tuesday, but still provided a few surprises in its comments.
The Reserve Bank board said that its mildly restrictive monetary policy remains appropriate for now, as it balances the effect of the mining boom against weakness elsewhere in the economy.
The statement noted that employment growth had moderated in recent months and a slower pace of employment growth is likely to continue.
With CPI expected to be close to target over the next 12 months, the RBA showed it is still concerned about inflation, but comments that underlying inflation is low saw the AUDUSD tumble slightly.
Financial markets are now pricing in a 70% chance of an interest rate cut by the end of the year, although the RBA still suggests the next move will be higher.
The big economic news later in the week was surprisingly strong unemployment data. The headline rate unemployment rate remained unchanged at 4.9%, as expected, but the jobs numbers was a positive surprise.
Total employment rose by 23,400 in June (above expectations for 15,200 extra jobs), but breaking down the numbers showed there was a surge in full-time employment.
This was a much needed kick for the local market, which has had a string of weak economic readings in recent months.
Overseas Market and Commodity Wrap:
Financial markets enjoyed another strong week, with equities and commodities putting on solid gains.
All three key US indices all finished ahead, albeit logging much more modest gains compared to the supercharged gains posted a week earlier.
With the positive debt developments in Greece wearing off, investors focused on the US which boasted mixed employment data at the end of the week.
The Dow rose 0.6% for the week, the S&P 500 inched 0.3% higher and the Nasdaq put on 1.6%. American companies will start reporting second-quarter earnings this week, which will drive the market for the next month.
In the UK the FTSE closed flat for the week, as media stocks fluctuated around the News of the World scandal and its effect on News Corp and its main rivals.
Asian markets put on strong gains, with Chinese markets (mainland China and Hong Kong) rising around 1.5%. The Nikkei rose 2.7%, with a weak yen helping to boost the key exporter stocks.
All the major commodity prices rose last week.
Oil prices rose 1.3% for the week, but had been up much stronger earlier in the week before a weak inventory reading and poor jobs data on Friday poured cold water on expectations of global energy demand.
Gold rose 4% as fears grew that the Euro debt crisis would spread to Ireland, Italy and Portugal. Other precious metals also closed with good gains. Silver (+8.5%) was the standout, followed by palladium (+2.5%) and platinum (-1.2%).
Base metals also logged good gains. Nickel rose 4%, while aluminium, copper and lead each gained around 2.5% for the week.