ASX CLOSE: Market surges through 4800

Wednesday 14th October 2009

Asian markets were broadly higher today as the region took its leads not from the modestly weaker US session, but from the stellar Intel Q3 earnings reports released after the bell, which saw US futures surge more than 0.7%.

The Shanghai market is currently trading higher by 2.5%, buoyed by Chinese iron ore imports hitting a record 64.6m tonnes in September, defying suggestions of a slowdown in demand. The Kospi finished in positive territory by more than 1.2% while the Nikkei 225 was flat for the session.

In Australia, the ASX 200 surged through the 4800 level, comfortably surpassing the previous year high of 4803 to close just off highs of the day, up 1% at 4831.1. Initially buoyed by the Intel result, the Australian market was also supported by a 1.7% jump in October consumer sentiment and those Chinese iron ore import numbers which clearly supports our materials sector and underlines the correlation between China's growth and Australia's economic prosperity. The release of the iron ore import numbers saw the AUD smash through 91c to be currently trading at 0.9131.

The 1.7% rise in September consumer sentiment was confirmation the Australian consumer had well and truly factored in the start of the rate hiking cycle. This, coupled with the very encouraging result from Intel and China's record iron ore import levels has driven the market to fresh 2009 highs.

With the market around the 4830 level, we're clearly within striking distance of those once distant end-of-year targets. With investors seemingly undeterred by how far we've rallied so far, a few more ‘better-than-expected' Q3 earnings reports from Wall St could see the market easily reach the line before year-end.

Further boosting investor confidence today was positive trading updates from the likes of CSL, Ansell and Rio Tinto. In fact, Rio Tinto upped its FY iron ore output forecasts while Ansell said it was trading ahead of expectations.

Just when it seems confidence and sentiment can't get any higher, it does. It's incredible. The market is clearing all possible hurdles easily. Every bit of better-than-expected data is adding more fuel to an already raging fire.

Looking across the market, all sectors except for the telecommunications space finished in the black as a combination of catalysts mentioned above spurred investors.

The energy sector was the best performer today, up 1.6% after Crude Oil futures for November delivery rose 1.2% overnight and strengthened to above $75 per barrel in Asian trade, the highest level in 7 weeks after the OPEC cartel upped its forecasts for global oil demand for this year and 2010. Santos (2.1%), Origin Energy (2%), Woodside Petroleum (1.9%) and Paladin Energy (1.3%) were the biggest gainers.

Despite a poor set of leads from US financials, the Australian financials sector was the second best performer, rising 1.1%. Commonwealth Bank of Australia was the best performer, up 2.5% while Westpac Banking Corporation, National Australia Bank and ANZ were all up between 0.7% and 1.9%. Macquarie Group was also up 1.7%.

The materials sector rallied strongly during the afternoon session, eventually finishing 1% higher, boosted by an upgrade to FY iron ore output guidance at Rio Tinto and the strong iron ore import numbers out of China. Also, a rampaging gold price has boosted the big gold miners with spot gold trading to a fresh all-time high of $1069.8 in Asian trade. Lihir Gold was the biggest gainer, up 4.1% while Bluescope Steel (2.9%), Newcrest Mining (2.3%), Rio Tinto (1.7%) and BHP Billiton (0.4%) all added significant points.

Elsewhere in the sector, Morgan Stanley upgraded Macarthur Coal (0.5%) to ‘overweight' from ‘equalweight' on expectations that restocking in 2010 will boost demand for commodities. It said "OECD restocking could add further support in 2010 and that, while China is currently destocking, a restocking cycle from the first quarter of 2010 could drive a strong reaction in both base metals and bulk commodities, like Macarthur's coal. We also expect to see the beginnings of a cyclical recovery in bulk commodity prices in 2010 as global steel production and power consumption are set to rise further after registering initial gains in 1H09, with hard coking coal and iron ore prices set to register the strongest percentage".

In other broker news across the market, Credit Suisse downgraded Toll Holdings (-0.2%) to ‘neutral' from ‘outperform' after the logistics giant announced it would acquire the remaining 64% of the Footwork Express business in Japan for $95 million. It said "while the acquisition of the remaining stake in Footwork Express is another example of Toll's ability to improve its Asian footprint, we see the current share price increasingly building in further acquisition-led growth ahead of delivery. While we have confidence in Toll management's ability to continue to acquire attractive assets, we do not include any such potential in our valuation. Consequently, the total return following recent share price strength is not sufficient to justify an ongoing outperform rating".

Prices are in AUD unless otherwise stated.
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