AFTERNOON REPORT
(4.30pm AEST)

The Australian share market snapped a three day losing streak today, rallying by 3.5pct as investor sentiment was boosted by hopes European leaders will announce fresh measures to address the sovereign debt crisis. The All Ordinaries Index (XAO) added 135.9pts to 4063.5, after touching an intra-day high of 4049. The S&P/ASX 200 Index (XJO) firmed by 140.7pts or 3.6pct to 4004.6.

Financial stocks led the strong gains witnessed on Wall Street overnight, with the KBW Banking Index up 4.8pct in New York. The S&P/ASX 200 Financials Index rose 4.3pct on our market, with a strong recovery from Macquarie Group (MQG) shares. MQG added 9.4pct to $21.92 while the big four also rallied. Prime Minister Julia Gillard today moves to reassure investors local banks have marginal exposure to the Eurozone woes.

"They also have low exposures to European banks and other borrowers that might be affected immediately by a major financial shock in Europe, below two percent of total assets,´´ she said. Shares in Westpac (WBC) today gained 5.5pct to $20.25 while the National Australia Bank (NAB) was up 5.8pct to $22.38 and the ANZ (ANZ) firmed by 5.4pct to $19.79. Shares in the Commonwealth Bank (CBA) gained 3.9pct to $45.55.

Mining stocks also advanced and were among the best performers on the market despite subdued metals prices. Index leader BHP Billiton (BHP) firmed by 4.1pct today to $35.35 while Rio Tinto (RIO) was up 5.4pct to $63.42. Overnight, RIO lifted its stake in Canadian mining company Ivanhoe Mines (IVN;cn) to 49pct, costing the company close to CA$73.1 million. The Australian dollar is currently at parity with the Canadian dollar. Shares in iron ore miner Fortescue Metals Group (FMG) added 6.7pct to $4.91.

The price of gold rebounded sharply in Asian trade, gaining US$52 an ounce to US$1647.60. Gold had dropped 11pct over the course of last week, its sharpest fall since February 1983. Shares in Australia's largest gold miner Newcrest (NCM) gained 4.8pct today to $34.42.

Energy stocks also rallied sharply. The price of oil was stronger at 4pm AEST, worth US$82.07 a barrel. Shares in Santos (STO) were a standout, up 6.1pct to $11.03.

In company news; Air New Zealand (AIZ) has announced plans to increase its stake in Virgin Australia (VBA) by 5pct to 19.99pct, just below the 20pct cap whereby the company would have to declare its interest in a full takeover. Air New Zealand insists it has no plans to increase its stake in VBA above the 49pct foreign ownership cap, but simply wants a more effective way to combat competition from Qantas (QAN) and its subsidiary Jetstar. AIZ and VBA already codeshare on a number of slights between Australia and New Zealand. AIZ shares closed steady today at $0.87 while VBA was firmer by 3.2pct to $0.32. QAN added 1.4pct to $1.44.

Meanwhile, toll road develop Connect East (CEU) gained 13.4pct to $0.55 after shareholders approved Horizon Roads´ $2.17 billion takeover proposal.

There was slight weakness in defensive healthcare stocks, but not enough to see the healthcare sector suffer a loss. Shares in hearing implant maker Cochlear (COH) fell 2c to $50.50 while vaccine maker CSL Limited (CSL) was also weaker by 2c to $29.

The Australian dollar recovered a lot of ground lost during yesterday's session and at 4pm AEST was buying US99c, £0.6345 and €73.06c.

On the market overall, a total of 2.35 billion shares were traded, worth $6.04 billion. 740 were up, 281 were down and 328 were unchanged.

At 4.30pm AEST on the ASX24, the futures contract was at 4033, up 154pts.

Ahead tonight September consumer confidence data is released in the US along with July home prices and the Richmond Fed Survey. At 4.30pm AEST, the Dow Futures 11053, up 81pts. ( From Juliette Saly, CommSec Market Analyst)