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ASX CLOSE: Market closes marginally higher

IG Markets Ltd

Tuesday 16th March 2010

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After another relatively flat finish on Wall Street overnight the Australian market closed marginally higher with the defensively postured telecoms, healthcare and information technology sectors among the best percentage gainers.

The ASX 200 closed up by 0.3% at 4797 having traded to a morning high of 4806.

With the market still digesting the likes of US financial reform, tightening prospects out of China, credit rating warnings from Moody's and continued uncertainty over the impacts and resolution of the European debt crisis, the near-term outlook for equities remains delicately balanced.

Several times over the last week the market has sought to break-out above 4840 but has quickly been rebuffed with there appearing to be little investor conviction to push the index beyond this level.

Last night in the US we saw markets pare early losses after Senator Chris Dodd announced his financial reform bill.  Rather than spooking the sector, financials rallied into the close, perhaps relieved the bill appeared a more moderate version of earlier drafts.  The positive momentum towards the end of the US session has carried over into our market with the local financial sector currently firmer by 0.2% with three of the four major trading banks higher between 0.1% and 1.0%.  NAB closed lower by 0.3%.

Given the 0.6% fall for the basic materials sector in the US, and broadly lower base metals prices, the local materials sector was expected to face some headwinds today.  That certainly hasn't been the case domestically with the sector finishing in positive territory by 0.4%.  Heavyweight names BHP Billiton and Rio Tinto are both higher by 0.2% and 0.4% respectively, while Lihir Gold closed up 3%, with gold bucking the trend to be US$5 higher in the overnight session.

With China likely to tighten in the short term, the view seems to be to look to exit out of resource names and enter into stocks such as banks and retailers leveraged to the Australian economy.  Some of the small cap stars that have perhaps not enjoyed as much interest as some of the blue chips are likely to also outperform in the short term.

A clear underperformer today has been the energy sector, which was lower by 0.5%.  Overnight the price of crude slipped 1.5%, slipping below the US$80/barrel level for the first time in 2 weeks, with the major energy names coming under moderate selling pressure.  Santos, Woodside Petroleum, Oil Search, Origin Energy and Caltex were all lower between 0.3% and 0.8%.

Blue chips seem to be taken a breather for now and are looking relatively fair valued in general. However, with Arrow seemingly set to reject the Shell/ PetroChina deal and look for a higher bid and CBH having a battle for its share register we know there is something out there for the day traders and certainly exciting times in the resource space.

It's probably fair to suggest we will trade in a tight range for the remainder of the day with all eyes focussed on tonight's FOMC meeting, the announcement of which will be released at 5.15am AEST tomorrow morning.  As usual, traders and investors will be closely watching for any indications as to when the Fed might be considering lifting the official cash rate.  In our view this is still some way off as there are numerous other steps the Fed can take to remove stimulus from the US economy before they need to contemplate rate hikes.

Locally, the release of the RBA's meeting minutes for March had little impact on the market.  Equities were essentially unchanged after the release; however the AUD slipped about 15 pips with the RBA believing inflation should be contained at approximately 2.5% over the course of 2010.  It seems that while rates will inevitably move higher over the year, there is no sense of urgency from the RBA.

 

Prices are in AUD unless otherwise stated.
IG Markets Ltd, Australian Financial Service Licence No. 220440. ABN 84 099 019 851.
This information is provided for information purposes and should not be regarded as financial product advice. This information does not take into account your specific objectives, financial situation or needs. Therefore you should consider the information in light of your specific objectives, situation or needs before making any trading or investment decision. IG Markets recommends you take independent financial advice before any decision whether to trade with IG Markets in the products we offer.



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