ASX Close: Australian market trades off highs but closes day in positive territory

Thursday 20th August 2009

Positive leads from Wall Street saw the Australian market open higher out of the gates pushing above the 4400 level before retracing to trade marginally higher for most of the afternoon. The ASX 200 index eventually settled 12.7 points or 0.3% higher at 4386.50

With oil prices surging 4.3% overnight to settle at US$72.42, it was little surprise to see the energy sector being the day's best performer rising 2.1%. Woodside Petroleum saw some strong follow-through buying, closing higher by 7.9% after jumping 3.6% yesterday, courtesy of a better-than-expected result. Other energy names well bid included Oil Search and Caltex which both closed higher by 2.7%.

Santos retreated by 0.2% despite delivering a better-than-expected result. Santos, like Woodside, beat market expectations but obviously wasn't as bullish in talks about its development plans for its Gladstone LNG plant whereas Woodside was full steam ahead talking about adding several additional trains to Pluto. In a market craving good news you have to give it cause to be positive.

Industrials performed strongly to be higher by 0.5% thanks largely to a better-than-expected profit result from Downer EDI. Its shares closed stronger by 10.1% after it posted a 14% increase in full-year profits to $189.4m.

With work in hand rising 8% to $14.6b, strong operating cash flows, a higher dividend payment and some rosy outlook statements, this stock seems to be rallying ahead of the inevitable broker upgrades that will occur in the coming days.

Another industrial name to perform well was Brambles, which despite posting a 30% decline in earnings said it was well positioned for global recovery. Its shares closed out the day stronger by 3.6%.

Higher overnight commodity prices were the catalyst for solid gains in the materials sector which tracked 0.7% higher. BHP enjoyed a solid day firming 1.1%, while Rio Tinto closed weaker by 0.2% ahead of its results announcement due out after the close of the market.

Orica and Alumina were other strong performers in the sector, both settling higher by 2.6 and 1.5% respectively.

Financials, after seeing some early morning buying interest, drifted in the afternoon session to eventually close lower 0.3%. The big four banks were mixed with the NAB and CBA marginally higher between 0.1% and 0.2% and both WBC and the ANZ lower by 0.9%. The standout performer of the day was QBE Insurance which surged 6.3% higher after announcing a 19% increase in 1H net profit to $1.02b on the back of strong premiums growth and better-than-expected margins.

Following a poor day yesterday, healthcare was again the day's laggard falling 2.1% dragged lower by CSL (-3.6%) and Ansell (-2.1%).

Consumer staples finished 0.6% lower, largely as a result of a 4.1% decline in Wesfarmers shares. While the group beat expectations in posting a 40% increase in full-year profits to $1.54b, the market didn't take kindly to its "cautious" and "uncertain" comments about its outlook.

While the result certainly beat the street a meaningful turnaround in Coles still appears some way off. It seems turning around Coles is akin to turning around the Titanic but at least it is turning and not sinking.

Apart from Wesfarmers, there were a number of names in the sector that enjoyed healthy buying support throughout the day, with Fosters, Metcash and Woolworths all higher between 1.2% and 1.9%. Several consumer discretionary names were also well bid with Tabcorp Holdings, Aristocrat Leisure and Tatts Group all finishing in positive territory between 1.1% and 4.6%. The sector closed in positive territory by 0.5%

In regional markets, the major Asian indexes were all performing strongly, led by the Shanghai market, which was trading higher by 3.6% at 2886. The Nikkei was also well supported, up 1.8% at 10392 as was the Hang Seng which was 1.9% into positive territory at 20336.

On the back of higher metal prices the AUD was trading at around the 0.8308 against the greenback while crude oil, after being down early was adding to overnight gains to be trading around the US$72.55 level.

Prices are in AUD unless otherwise stated.
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