ASX CLOSE: Market finishes weaker; losses broadly spread

Wednesday 16th December 2009

Across Asia, regional indices are broadly lower in line with the negative leads from overnight markets. The Nikkei 225 is bucking the negative trend to be higher by 0.6%, buoyed by a weaker Yen and a newspaper report that new capital rules for Japanese banks will be delayed. Elsewhere around Asia, the Hang Seng, the Kospi and the Shanghai Composite are lower by 0.9%, 0.2% and 0.3% respectively.

In Australia the ASX 200 weakened in afternoon trade, to close lower by 0.25% at 4661.9, well off its morning highs of 4689. Losses were broadly spread across the financial, material, industrial and consumer sectors with energy enjoying a second consecutive day of gains.

Earlier in the session the ASX 200 was more than 0.4% higher but traded lower when the Q3 GDP number crossed the tape at 0.2%, below expectations of a reading of 0.4%. The weaker GDP print saw 30 basis points quickly wiped off the AUD, with further reason for the RBA to possibly pause its rate hiking campaign in February.

Comments from the RBA's deputy governor Ric Battellino also hinted that three consecutive rate hikes in addition to independent increases from the commercial banks had bought monetary policy back to a more normal range. The AUD is now trading sub 90c at 0.8990.

In our midday report I made the following comment - "Flat in midday trade on the back of soft offshore leads, a stronger USD and a slightly weaker-than-expected GDP print - we'll take that every day of the week! Holding these levels throughout the afternoon will now be the challenge."

As has so often been the case in recent weeks, today was another session where we rolled over and gave up earlier gains providing further evidence that this market's interest levels and energy levels are shot. I'm sure many investors are wishing Christmas and New Year could come earlier this year just to see the back of 2009.

For a second straight day we saw the energy sector outperforming the broader market to close higher by 1%. This was thanks in part to crude oil prices surging more than $2.80 or 4.1% overnight but also Exxon's takeover offer for XTO Energy, with the acquisition multiples implied drumming up speculation that several of our major energy names could soon find themselves "in play".

Oil Search, Santos and Origin Energy are enjoyed gains to be higher by 3.1%, 1.9% and 0.7%, with Oil Search buoyed by news the PNG LNG partners has secured US$14b of project financing to develop the LNG project. Caltex lagged the pack, closing lower by 1.7% while Woodside remained in a trading halt as it completes its $2.5b capital raising but is set to resume trading tomorrow.

Overnight we saw the continuing resurgence of the USD, with the greenback hitting fresh 10-week highs against the Euro thanks to a hot PPI print (1.8% rise in producer prices in November) and better-than-expected industrial production numbers. Despite the stronger USD, the materials sector was higher earlier but like the rest of the market traded off in the afternoon to close lower by 0.4%

Having traded higher in the morning, BHP and Rio Tinto both finished in negative territory by 0.1%. Earlier in the session miners were undoubtedly buoyed by yet another broker (this time Macquarie) upping its iron ore and coal price forecast for 2010. The steady stream of commodity price upgrades by brokers heading into 2010 will no doubt be tested in the short term as the market continues to get its head around the prospects of a strengthening USD next year.

With gold down about US$4 overnight, gold miners Newcrest Mining and Lihir Gold closed weaker by 1.3% and 2.1% respectively.

The financial names were shrugging off negative leads from their offshore counterparts before the afternoon slide kicked in. The sector finished weaker by 0.4% with the major banks turning in mixed performances. ANZ finished higher by 0.3%, Commonwealth Bank and National Australia Bank were marginally weaker by 0.1%, while Westpac fell 0.8%. Westpac's slide came despite positive comments from Westpac CEO Gail Kelly suggesting strong momentum across all its businesses heading into 2010.

Axa Asia Pacific and its takeover suitor AMP closed lower by 2.2% and 1.6% respectively as the market speculated that the Axa board may reject the takeover deal without giving shareholders the opportunity to vote on the transaction.

Across the consumer space, staples names such as Woolworths and Wesfarmers were softer by 0.3% and 0.4% respectively while Fosters ended stronger by 0.3%, no doubt supported by its USD revenue base.

Consumer discretionary names were broadly weaker having given up some ground after the GDP numbers. Harvey Norman, David Jones and JB Hi-Fi finished lower by 0.7%, 1.1% and 1.3% respectively, while Myer enjoying a rare outperformance of it peer group to close flat as we saw Macquarie Equities join the list of brokers initiating coverage on the stock with the "buy" rating.

Prices are in AUD unless otherwise stated.
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