ASX CLOSE: Market closes session flat

Wednesday 10th March 2010

Across Asia, regional markets are mixed after a modest set of leads from Wall St and stronger-than-expected import data from China. The Hang Seng is the best performer, up 0.2% while the Nikkei, Shanghai Composite and Kospi are all weaker between 0.1% and 0.5%.

Locally, the ASX 200 closed the session flat at 4820 having traded as high as 4837.6 and as low as 4804. Defensive sectors came into play today as investors appeared to rotate out of the cyclical names that have pushed the market higher in recent weeks.

Having been up for eight consecutive sessions, the market is beginning to trade as many suspected it might. It looks tired and a bit overstretched in the short term so a breather and consolidation certainly looks likely. This coincides with US markets reaching the top of their trading ranges as well.

Whilst a consolidation period is expected over the next week or so, it appears the bulls are certainly in control of the market. A number of global indices have already broken out so even the slightest sniff of a bullish catalyst could see the ASX propelled to new post-GFC highs. The question is which sector will lead us higher?

Also, the breakout seen on the Dow Jones Transportation Index is a very bullish sign as it is typically a good indicator for Wall St.

In economic news, Australian consumer confidence rose a further 0.2% on-month in March. It was a pretty strong result given the backdrop of four recent rates rises from the RBA. In an accompanying note from Westpac, it said the rate levels have yet to reach a zone that would hamper confidence significantly. However, that could be about to change, with any further rate hikes likely to push mortgage rates beyond 7%, which has been a significant threshold for confidence in previous economic cycles.

Still on economic data and Australian housing finance figures were down sharply in January, surprising the market which had expected a gain. It slid 7.9% on-month versus forecasts of a 2% rise. The weaker data may be seen as a positive given policymakers have been warning about a major housing shortage. Also, it suggests the market is feeling a little pain from higher interest rates.

The market was rather defensively postured today with the telecommunications and utilities sectors among the best performers, up 2.6% and 1.3%.

The financial sector managed to add points, albeit modest. It rose 0.1% as QBE Insurance Group continued its good form, gaining 1.5% following the Melbourne storms. Elsewhere, three of the big four banks were all up between 0.5% and 1.4%, with Westpac Banking Corporation the outperformer. National Australia Bank bucked the trend, slipping -0.3% for the session.

Despite marginally higher base metal prices overnight, the materials sector saw a second consecutive day of losses, falling 0.2%, having been the market's shining light for much of the last fortnight. That said a breather for the sector was widely anticipated. It is really just a matter of the depth and duration of the pause that is in question.

Sector leaders BHP Billiton and Rio Tinto finished weaker by 0.4% and 1.1% respectively, with Fortescue metals also closing 0.4% in the red. Fortunes were mixed for the major gold names with Newcrest Mining ending down 0.4%% while Lihir Gold surged by more than 3.1%.

In a note from Royal Bank of Scotland, Rio Tinto's target price was upped to $100.34 per share after the broker lifted its 2010 iron ore settlement price forecast, as well as coal. RBOS believes iron ore prices will settle up 60% on the year, up from their previous forecast of 20%. It expects thermal coal to settle at US$95 per ton, up from US$80 per ton.

The industrials sector also saw some selling today, down 0.4%. Downer EDI, Macquarie Airports and Toll Holding did most of the damage, weaker between 1% and 2.5%.

Elsewhere, typically defensive consumer staples stocks detracted with Coca-Cola Amatil and Wesfarmers both down more than 1.4%.

In stock specific news, Atlas Iron's takeover over of Aurox Resources shows that infrastructure assets are at the top of Pilbara iron ore developers' shopping lists. Atlas is less interested in Aurox's Balla Balla magnetite project than its 10 - 12 million tons port capacity at Port Hedland. Projects without clear access to rail, road and port infrastructure have greatly diminished value. The deal is a boost to Atlas' pipeline of projects and puts other junior iron ore developers with port capacity firmly in the spotlight.

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