ASX CLOSE: Australian market follows US performance with flat close

Thursday 27th August 2009

With weaker leads from offshore markets, the Australian market opened 20 points, or 0.4% down at 4434. After a day of oscillating in and out of positive territory the ASX 200 eventually closed marginally lower by 3.7 points or 0.08% at 4450.8.

In local economic news, the Australian Bureau of Statistics announced that Australia's Q2 private capital expenditure had risen by 3.3%, smashing consensus expectations for a 5% fall. This prompted some corners of the market to speculate on a pre-Christmas rate hike.

A pre-Christmas rate rise? Not a chance. The RBA have signalled they are very cautious about choking the fragile consumer too soon, having learnt from past mistakes. There is no way the RBA would risk killing the spirits of consumers before the all important Christmas shopping season. It would be a disaster for retailers.

Cyclical sectors such as materials and consumer discretionary detracted the bulk of the points, both weaker by 1.2% and 0.5% respectively. Property trusts and the financials provided most of the support for the market, closing higher by 1.2% and 0.7% respectively.

Materials were the worst performing sector following leads from the FTSE 100 and S&P 500. Softer base metal prices saw Rio Tinto and BHP Billiton trade lower by 3.0% and 1.3% respectively. Other names that saw selling pressure included Alumina, down by 3.2%, and Bluecsope Steel, weaker by 3.0%.

Still in the materials space, Oz Minerals announced a $580.7m loss for the full year, with the result negatively impacted by lower commodity prices and one-off losses from asset sales. The result is effectively incomparable with previous periods because of restatements of prior year accounts and the divestment of a majority of its assets to MinMetals. The stock closed down 6.1%.

In the consumer discretionary space we saw selling pressure in Western Australia News, Tatts Group and Ten Network Holdings, all lower between 3.0% and 4.5%.

The energy sector saw some weakness, down 0.1%, having been a stellar performer over the last few weeks. It was always going to be an interesting day in the energy space as Crude Oil slipped for a second night on an increase in inventories. However, on the S&P 500 the oil producers did surprisingly well to be one of the top performers. Having enjoyed solid buying support in recent sessions, names such as Woodside Petroleum, Oil Search and Santos all bounced off morning lows to close up between 0.3% and 1.2%. Origin Energy bucked the trend, lower by 1.3%.

Consumer staples were softer by 0.1%, however some names which saw buying interest including Goodman Fielder (1.0%) and Metcash (2.1%). Woolworths rose 0.3% after announcing a full year net profit of $1.84b which was 12% higher than last year and better than consensus estimates. The company also upped its final dividend from 48c to 56c and forecasted net profit growth for FY10 of 8%-11%.

Industrials, after trading lower earlier in the session finished higher by 1.5% with most of the buying interest coming from Toll Holdings, Asciano, and Macquarie Airports, all stronger between 2.1% and 5.7%.

Financials, which had a mixed to slightly weaker lead from the UK and US sessions, surprised to the upside trading firmer by 0.7% with all four of the major banks well into positive territory. ANZ and Westpac were the standout performers rising by 1.8% and 1.5% respectively.

Turning to regional markets, the major Asian indices are lower across the board this Thursday with investors cautious about chasing equity prices higher. We're seeing a bout of profit taking across Asia today as investors head towards the sidelines as September approaches, typically the worst performing month for US equities. Slowly, investors globally appear to be tiring after massive rallies from the March lows.

The durable goods orders and the new homes sales numbers should have been enough to see US markets break convincingly higher. That the US closed the session flat is a classic sign it may have run out of steam in the short term.

The Nikkei 225 is the biggest regional faller, down 1.6% while Hong Kong's Hang Seng is 1.3% lower and the South Korean Kospi is 0.9% weaker. Shanghai's Composite is 1.1% lower in volatile trade.

Prices are in AUD unless otherwise stated.
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