IG Markets - Australian Market Wrap August 5, 2010

IG Markets - Australian Market Wrap

Across Asia, regional markets are mixed despite the distinctly positive aura stemming from the US session overnight. The Nikkei 225 is 1.4% higher and clearly benefitting from a reprieve in the Yen’s recent strength while the Shanghai Composite and the Kospi are weaker by 0.6% and 0.3% respectively. The Hang Seng is flat.

In Australia, the ASX 200 closed 0.5% firmer at 4566, but well off its earlier highs of 4580. Gains for the day were relatively broad based and predominantly driven by the cyclical/growth orientated industrials, materials and energy sectors. The financial sector ended higher but was a relative underperformer on the day.

The best performer for the session was the energy sector which closed 1.1% higher with optimism about the global economic outlook and the resultant 0.5% surge in overnight crude prices underpinning gains. Among the heavyweight names, Origin Energy, Oil Search, Santos and Woodside Petroleum were all firmer between 0.5% and 1.2% while Caltex saw some selling pressure to be lower by 1.4%.

Focus within the sector today was upon Whitehaven Coal whose shares surged 5.9% higher as the company was rumoured to be considering takeover approaches from one to two offshore suitors.

The materials space again played a leadership role in today’s advance with the sector finishing stronger by 0.7%. Firmer base metal prices overnight and improving risk appetite fuelled the move higher. BHP Billiton and Rio Tinto were 0.4% and 0.2% stronger respectively with the latter due to report its interim results after the market close. Elsewhere, it’s a sea of green across the major materials names with Fortescue Metals, Bluescope Steel, Alumina, and Amcor all up between 0.7% and 2.1%.

A relative underperformer on the day was the financial sector which closed 0.3% higher. While NAB and the ANZ closed higher by 0.8% and 0.3%, both CBA and Westpac ended flat. Other major names around the sector seeing solid buying support included Macquarie Group, QBE Insurance and AMP which ended stronger between 0.6% and 1.8%.

Of the notable companies to report today, Tabcorp Holding was down more than 2% after producing a FY net profit of $469.5m which was short of consensus estimates of $476m and down 10% from a year ago. The company also declared a final dividend of 25c, less than the 30c paid last year.

At the other end of the spectrum, News Corp shares surged by more than 5.3% after the company smashed its Q4 earnings expectations and upwardly revised its forecast operating income growth for 2011 from high single digits to low double digits.

As alluded to in recent days, global equity markets seem to be in a holding pattern, riding out choppy economic data and digesting pretty decent earnings numbers but readying themselves for rally later in the year. While there is growing consensus that some sort of rally is on the cards, how aggressive it is is the big unknown. A stabilisation in US housing data and an improvement in the US employment outlook would certainly be positive catalysts. Last night’s encouraging private sector jobs report was a step in the right direction with focus now shifting to the private sector component of Friday’s non-farms payroll s report where expectations are for 90k jobs to have been created in July.

Cameron Peacock
Market Analyst
IG Markets

ENDS

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