ASX CLOSE: Market drifts as neither the bulls nor bears want to take control

Thursday 1st October 2009

Asian markets drifted low throughout afternoon trade after a weary end to the 3^rd quarter on Wall Street, with all 3 major indexes posting moderate losses. The Nikkei 225 was down 1.5% despite the Tankan report coming in better-than-expected. What appears to be weighing on the market are concerns the economic recovery may falter after the survey showed companies planned to deepen cuts to investment. The Kospi closed 1.7% weaker.

In Australia, the ASX 200 finished 0.9% lower at 4701.1 having earlier traded as high as 4757. The financial and material sectors detracted the bulk of the points after both were down in the US. The best performers on the local market were the energy names which benefitted from the 5.8% surge in Crude Oil overnight and the major gold producers after spot gold added $16 in the US session.

With bucket loads of economic data due in the US tonight and tomorrow, and China and Hong Kong on holiday, the ASX 200 is ever more reliant on the US lead to dictate the day's direction. As we're seeing today, the market is just drifting as neither the bulls nor bears want to take control.

The beginning of the month and quarter are not usually the most active times, especially considering the ASX 200 has just posted its biggest quarterly rise in 22 years. With the market approaching a critical resistance zone through 4800 - 5200 and suffering from ‘Octophobia', we're unlikely to see large bets before tomorrow night's non-farm payrolls and probably not before US Q3 earnings kick off next week.

The market seems hungry for a new catalyst. Whether it comes in the form of sharply better or worse-than-expected economic data or surprising Q3 earnings reports is anyone's guess.

The property trusts (-1.8%), financials (-1.5%), consumer discretionary (-1.1%) and materials (-0.7%) detracted the bulk of the points today.

In the property sector, Westfield Group (-4%), GPT Group (-3.7%), Mirvac (-1.8%) and Stockland Group (-1%) were the biggest decliners on what appears to be some profit taking following strong gains in Q3.

In the financials space, it was a sea of red with QBE Insurance Group (-3.2%), AMP Limited (-2.9%) and Bendigo & Adelaide Bank (-1.8%) leading the fallers. The big four banks were all significantly lower, down between 0.9% and 1.8% with Commonwealth Bank of Australia the worst performer.

The transformation at Macquarie Group (-1.7%) continues with the US$130 million purchase of Fox-Pitt Kelton, a boutique global investment bank providing merger & acquisition advisory services, debt and equity placement and equity research to the financial services sector. This follows Augusts' US$428 purchase of US diversified asset management firm Delaware Investments. The group is looking to bulk up its global asset management and financial services business and reduce its reliance on management fees from satellite funds, as we have seen with the $345 million severance payment from Macquarie Airports shareholders to sever the management role.

In the consumer discretionary space, Tattersalls, Harvey Norman, Fairfax Media and Billabong International were the major losers, all down between 2.1% and 3.2%, with Tattersalls the biggest underperformer.

Among material stocks, Fortescue Metals Group (-3.7%), BHP Billiton (-1.4%), Alumina (-1.1%) and Rio Tinto (-0.6%) weighed the most despite stronger base metal leads from London. Paring further falls were the gold stocks and BlueScope Steel.

Royal Bank of Scotland boosted BlueScope Steel's (2.7%) target to $3.75 from $3.55 and kept its ‘buy' rating after removing its 5% earnings discount following the ramp-up of Port Kembla steelworks output. It said "whilst the level of underlying demand remains clouded, the benefits from the domestic restocking activity and strong export demand have advanced the recovery leverage".

Lihir Gold (3.2%) and Newcrest Mining (2.1%) were both strong following the strong push higher in gold overnight.

Prices are in AUD unless otherwise stated.
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