ASX CLOSE: Market flat, financials and energy sectors head south

Wednesday 9th September 2009

Despite strong offshore leads, it was a topsy-turvy session for Asian markets today. The Nikkei 225 was down 0.8% and the Korean Kospi 0.7%. The Hang Seng and Shanghai Composite are still trading, down 1% and up 0.3%, respectively.

In Australia, the ASX 200 was basically flat for the session, down 1.6 points at 4522.2, well off this morning's high of 4554.7. The financials sector detracted the most points after relatively weak offshore leads. Also, the energy sector turned south following a strong start.

After yesterday's strong advance, it seemed the market had run out of puff, despite the overnight gains. The weaker-than-expected retail sales numbers this morning surprised the market, triggering some profit taking.

On the charts, the ASX 200 is facing major resistance through the 4540 - 4550 level, a confluence of both the 50% (May 2008 high - March 2009 low) and 38.2% (2007 - 2009 low) Fibonacci levels. Recent rejections around these levels show strong selling pressure, possibly pointing towards further weakness in coming days.

In economic news, retail sales fell 1% on the month against expectations for a 0.6% gain, confirming that the consumer is still very fragile and likely to be become extremely spend conscious as and when stimulus measures are unwound. A 2009 rate hike, while priced in by markets, could see Glenn Steven labelled the "Grinch that stole Christmas".

Also, the Westpac / Melbourne Institute consumer confidence index rose by 5.2% in July, following on from yesterday's jump in business confidence to its highest level since October 2003. So while we are clearly seeing forward-looking confidence levels on the rise, more tangible evidence of recovery, by way of increasing business investment, advancing retail sales and falling unemployment, is likely required to push the market higher through this seasonally weak period.

The industrials (1.1%) and materials (0.3%) sectors added the majority of points today, limiting further falls.

Qantas (3.7%), Downer EDI (2.3%), Brambles (3%) and Asciano (2.5%) were the main gainers in the industrials sector. Reports this morning suggested Qantas was looking to sell its 46.3% stake in Fiji's national carrier, Air Pacific as part of a move to block the planned increase in capacity on the route from competitor Virgin blue.

In the materials sector, Bluescope Steel (2.8%), Newcrest Mining (1.5%), Alumina (0.9%), Rio Tinto (0.7%) and BHP Billiton (0.3%) were the major advancers. Citigroup this morning raised their price targets for both Newcrest Mining and Lihir Gold. Newcrest Mining was upped to $37.70 from $34.70 per share while Lihir Gold's target was raised from $3 to $3.40. Both were due to earnings and net present value upgrades from the higher gold price forecasts.

After pushing up to a high of $1007 overnight, buyers of gold looked far from convinced as bullion sharply reversed earlier gains. The large upper shadow shows a rejection of these prices, possibly pointing towards a pullback.

The overnight leads for materials were strong with all base metals rising from Australian market close. Copper was up 2.1%, Aluminium 2%, Zinc 2.1% and Nickel 0.2%. Rio Tinto and BHP Billiton both finished higher, up 3.6% and 2.6% respectively. In US trade, the S&P Basic Materials sector rallied 1.4% with Freeport McMoRan gaining 3% and Alcoa stronger 3.4%.

After a strong start to the session, the energy sector lost ground after the economic data releases. It eventually closed 0.6% lower, one of the worst performers and despite the strong rise seen in Crude Oil overnight. The black gold surged 4.6% to $71.10 (currently $71.44) as US dollar weakness boosted commodities and investors looked ahead to tonight's OPEC meeting in Vienna. The S&P Oil & Gas sector added 2.8% with Exxon Mobil and Chevron up 2.1% and 2.2% respectively. In London, BP and Royal Dutch Shell advanced between 0.6% and 3.5%.

However, local stocks didn't see the same gains with the likes of Caltex (-1.9%), Woodside Petroleum (-1.1%) and Santos (-0.9%) hurting.

The financials sector also detracted, down 0.3% with the big four banks mixed. Commonwealth Bank of Australia and Westpac Banking Corporation were 0.4% and 1.1% lower while ANZ and National Australia Bank both rose 1.1%. The biggest decliners were Suncorp-Metway (-2.7%) and Westfield Group (-2.2%).

Prices are in AUD unless otherwise stated.
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