ASX CLOSE: Markets falls slightly; gold shines bright

Thursday 3rd September 2009

Across Asia, regional markets were mixed in afternoon trade. Japan's Nikkei 225 finished down 0.6% while the Kospi closed flat. In markets still trading, the Hang Seng is up 1% while the Shanghai Composite is stronger by 4%.

In the US overnight, stocks fell for the fourth consecutive session as concerns over the economy heightened after private sector job losses and factory orders fell more than market expectations.

With flat to weaker leads from offshore markets, the Australian market spent most of the morning session trading moderately lower, falling to a low of 4410 but recovering in the afternoon to eventually close the session 8.6 points or 0.2% lower at 4429.6

Both in Australia and the US, its encouraging to see a lack of downside selling momentum, especially after yesterday's big fall. For buyers to step in and support the market at this point is a real slap in the face for the bears. The market is finding it hard to sell off.

With the exception of the consumer discretionary and materials sectors, the Australian market took on a defensive posture with the healthcare, telecommunications, utilities and information technology sectors contributing the most points to the index, all higher between 0.3% and 1.4%.

The consumer discretionary sector traded 0.8% stronger, boosted by Ten Network Holdings which gained 4.9% after being added to Goldman Sachs ‘conviction buy' list, while Crown Limited added 3.8% after Credit Suisse upped its price target to $8.90 from $7.75.

Despite the defensive posturing of the market, the materials sector closed 1% higher with majors BHP Billiton stronger by 0.2% and Rio Tinto lower by 1.3%. However the sector was dominated by buying interest in the gold producers.

With gold surging US$25 overnight to a high of US$981, there was strong buying interest in gold names with Newcrest Mining, Lihir Gold and Sino Gold all stronger between 7.2% and 10.7% with Sino Gold leading the way.

At the moment, gold seems to be the talk of the town, both locally and in the global arena. Given recent buying momentum, it looks like Gold wants to go higher and is very close to breaking out of a bullish ascending triangle pattern. It pulled back slightly in Asian trade, but still looks ripe for further gains once European and US trade kicks in.

Seasonally, we're heading into a very strong period for gold as demand begins to kick in with the Indian harvest and wedding festivals in autumn. It's also boosted by its perceived safe haven qualities with equities are expected to pullback during the September / October period.

Contributing most to the moderate losses for the session were the financial, industrial and energy sectors which all traded in negative territory between 0.6% and 0.9%

Financials, having been outperformers early in the week after the ANZ trading update, were sold off for a second consecutive day in line with global financial stocks over renewed concerns of further bank failures. All four major trading banks finished lower between 0.1% and 2.3% with National Australia Bank lagging the pack, after stating that it would not expand the size of it retail share purchase plan.

Industrials were another major drag on the index with growth orientated names coming under pressure - Downer EDI (-3.4%), Toll Holdings (-3.3%), and Brambles (-3.0%).

A flat overnight session for crude oil, which remains at two week lows of US$68 per barrel, was again contributing to losses across the energy space. Names such as Woodside, lower by 1.7%, Caltex softer by 1.2% and Santos, down 0.6% saw the bulk of the selling pressure.

In local economic news, the Australian Bureau of Statistics announced Australia's trade deficit for July had blown out to a much worse-than-expected $1.56b versus an $850m forecast. The widening in the deficit was attributed to a 4% surge in imports from a month earlier, no doubt the result of a stronger AUD and the impact of government stimulus.

Prices are in AUD unless otherwise stated.
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