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ASX CLOSE: Defensive stocks and financials add bulk of points today

IG Markets Ltd

Friday 8th January 2010

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In Asia, stock markets are mixed as stronger-than-expected US retail sales boosted confidence in the global economic recovery. The Nikkei 225 is the best performer, adding 0.7% while the Kospi is up 0.5%. On the downside, the Hang Seng is lower by 0.2% while China's Shanghai Composite is 1% weaker.

Further south, the ASX 200 Index rose 0.3% to finish the week at 4912.1. Trade today was almost the exact opposite of what we've seen over the last few trading sessions. Defensive stocks and financials added the bulk of the points after they were the best performing sectors overnight.

Commodities based stocks took a breather today, succumbing to profit taking as the weekend approached and after base metal prices came under pressure overnight.  Commodities were dragged south by US dollar strength following the retail sales data and news that China will focus on controlling their lending and price increases in 2010.                 

This isn't surprising at all to see some profit taking ahead of the non-farm payrolls weekend. Traders would be locking in solid gains for the week and not have to worry about potential volatility tonight when the data is released.

Tonight's nonfarm payrolls employment data will be crucial in setting the tone for next week's trade. If forex traders push the US dollar higher then it will erode some support which has recently helped support US dollar denominated commodity prices.

In market action, the telecommunications sector was the standout performer, adding 1.8% as Telstra rebounded from yesterday's fall, rising 1.8%.

The consumer staples (1.3%) and financials (0.6%) were the other major sectors to add points. Among staples stocks, Wesfarmers was the leader, rising 2.5% while Coca-Cola Amatil, Metcash and Woolworths were all up between 0.9% and 1.6%.

After two days of dragging the market back, it was the financials turn to rally. Commonwealth Bank of Australia was the best performer, rising 1.3% while Bendigo Bank, QBE Insurance Group and Insurance Australia Group were all up between 1.1% and 1.2%. Of the other banks, ANZ and Westpac Banking Corporation finished in the black, up 0.6% and 0.4% respectively while National Australia Bank slipped by 0.3%

Qantas was the standout in the industrials sector, rising 2.1% while Brambles added 0.3% after an announcement this morning.

Brambles announced they had undertaken another restructure and reshuffle of its leadership team after confirming the "open secret" that Craig Van der Laan had resigned, with Peter Mackie to be his replacement as head of CHEP in Asia-Pacific. Peter will only come across from his role as interim head in Europe once a permanent replacement for newly promoted CEO Tom Gorman is found. Logistics industry veteran, Jim Ritchie, who only joined Brambles in June to lead CHEP in the US, has been promoted to take charge of America, replacing Kevin Shuba, who as one of Brambles' most experienced executives will take on a new customer development role, overseeing Brambles' worldwide operations. Ritchie and Mackie have been added to the firm's executive leadership team, joining Shuba and the new CFO and CIO added since Gorman replaced Mike Ihlein in November.                  

In the consumer discretionary (flat) sector, Billabong International was the standout, rising 5.3% after Morgan Stanley reiterated their ‘overweight' rating on the stock and Zumiez, which sells Billabong apparel jumped more than 15% in US trade overnight after a strong sales result.

On the downside, the materials sector held the market back today, losing 0.6% after a very strong week of gains. Newcrest Mining fell 2.6% and was top decliner despite announcing it had won planning approval for its $2 billion Cadia copper and gold mine in NSW. Elsewhere, Fortescue Metals Group lost 2.1% while Alumina, Lihir Gold and BHP Billiton were all down between 0.3% and 1.5%.

Interestingly, in a report from Cazenove in London, they downgraded BHP Billiton to ‘in line' from ‘outperform'. Overall, they still see some favourable, albeit "tired" themes for the sector, with BRIC (Brazil, Russia, India & China) economic growth, infrastructure spend, US/European restocking, and supply issues amongst the macro drivers. Also, Cazenove noted the massive injection of money into commodity-focussed funds, which it thinks could continue for at least six months or until global interest rates begin to rise. They believe it's likely there will be some aggressive increases to consensus 2010 EPS forecasts.

Elsewhere in the sector, CBH Resources this morning requested a trading halt after a report said that it was poised to announce an incomplete takeover proposal they had received. The miner said yesterday it was in confidential talks with a number of separate parties on "transactions that are focused on generating shareholder value". The Australian Financial Review, in its Street Talk column, said CBH is expected to reveal it has had takeover approaches and that rumours centre on Nyrstar (the zinc smelter spun out of Zinifex) making upstream acquisitions. Any bid will need support of CBH's major shareholder, Toho Zinc, which holds a 23% stake.      

 

 

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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