ASX CLOSE: Market closes flat

Monday 29th March 2010

In Asia, regional equity markets are mixed following the flat leads from Friday. The Shanghai Composite is the best performer, up 2.1% while the Hang Seng is stronger by 0.8%. On the downside, the Nikkei 225 and Kospi are weaker by 0.1%.

In line with Friday's US lead, the ASX 200 finished flat for the session at4897.30. Growing comfort that the European sovereign debt issues are under control supported commodity prices, and in turn buoyed our materials sector today.

Financials were neutral after RBA Governor Glenn Stevens gave his strongest indication yet that further rate hikes were imminent.

Given the holiday shortened trading week and in the absence of serious window dressing, we're anticipating light volumes and a tight trading range. There is plenty of economic news due this week, culminating in Friday's non-farm payrolls report where markets are anticipating the creation of some 200,000 jobs.

Given the Good Friday holiday, equity markets will not be trading on the day. As Easter Monday is also a holiday for many equity markets, numerous indices will not see the US reaction to the result until Tuesday.

In a comment from Macquarie Group, it said RBA Governor Glenn Stevens' morning television appearance is a clear cut sign the central bank is now more likely than ever to raise the cash rate once again in April. Macquarie Group believes this was so unprecedented from Stevens that it doesn't remember a RBA Governor ever being on breakfast TV advertising higher interest rates. JPMorgan commented as well, saying it's very unusual for any central bank governor to be on morning TV. He's sending a message to the public that if he doesn't see easing in the housing market he wants, he may have to raise rates higher and quicker than currently projected.

Turning our attention to the market and gains of 3% and 1% for Mirvac Group and Westfield Group boosted the property trusts sector. It rose 0.6%

Consumer discretionary stocks were also well bid today following the positive US discretionary lead. The sector rose 0.2% with Crown, Fairfax Media and Tabcorp Holdings all rising between 1% and 1.3%.

The materials sector managed to eke out marginal gains of 0.2%, helped by heavyweight miners BHP Billiton and Rio Tinto which firmed by 0.2% and 0.1% respectively. Gold miners Lihir Gold and Newcrest Mining ended higher by 0.6% and 1.1% while Bluescope Steel consolidated its recent gains, advancing 1%.

The financial sector scraped into positive territory, adding 0.1%. Suncorp and QBE Insurance Group rose led the group higher, up 0.8% and 0.6% respectively. The big four banks were mixed with National Australia Bank and Westpac rising 0.4% and 0.3% while ANZ and Commonwealth Bank of Australia fell 0.1% and 0.6% respectively. Axa added 0.2%.

Investors were on the lookout for an announcement from National Australia Bank and takeover target AXA Asia Pacific ahead of today's deadline for talks with target's 53.9% owner, AXA SA. Negotiations may go down to the wire as NAB seeks agreement from AXA APH's French parent for it to buy its Asia operations, leaving Australia and New Zealand business to National Australia Bank. An AXA SA external spokesman said talks continued over weekend with the French still striving to reach a deal today.

Flat crude prices provided an excuse for the energy sector to retreat by 0.3% with most of the major names convincingly lower. Woodside, Oil Search, Caltex and Santos all ended lower between 0.3% and 1% with the latter being downgraded.

In a broker note from Credit Suisse, it downgraded Santos to ‘underperform' from ‘neutral' to reflect the recent strong share price performance, with the stock up 12.8% in March. The broker said the up to $200 million sale of Evans Shoal asset was lower than expected, with the estimated net present value over the long-dated development timeline of $150 million below its estimate of $250 million. Credit Suisse anticipates the need for significant funding around 2011 for Santos' LNG projects, with the sale of Evans Shoal not significantly alleviating the forecasted funding shortfall.

Prices are in AUD unless otherwise stated.
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