29/07/10 - 12:30
Ben Potter, Research Analyst
Market Update from the Trading Room – 12.30pm
ASX 200 Index: 4510 (-0.4%)
| Top 3 Sectors | Bottom 3 Sectors | Materials | 0.10% | Utilities | -1.20% |
|---|---|---|---|---|
| Information Technology | 0.10% | Energy | -1.00% | |
| Consumer Staples | 0.00% | Financials | -0.80% |
| Advancers (Index Points) | Decliners (Index Points) | |||
|---|---|---|---|---|
| BHP Billiton | 2.5 | Westpac Bank | -2.9 | |
| Wesfarmers | 0.5 | ANZ Bank | -2.4 | |
| Newcrest Mining | 0.3 | Commonwealth bBank | -1.3 |
As expected, the Australian market is trading modestly lower after a lacklustre US session, which saw stocks retreat on a weak earnings report from Boeing and a softening Beige Book reading.
The ASX 200 is currently 0.4% softer at 4510 with all sectors except the materials and information technology in negative territory.
Not surprisingly, the financial sector is the one of the morning’s weakest performers, currently down 0.8% after being a drag on US markets overnight. A Moody’s downgrade to the outlook for Bank of America, Citigroup and Wells Fargo to “negative” from “stable” was the catalyst for the losses.
Locally, our four major banks are weaker between 0.3% and 1.1%. Westpac is the biggest loser, while Macquarie Group is lower by 0.7%. Insurance peers, IAG and QBE, are also down by 0.9% and 1.2% respectively, continuing their recent runs of losses after both companies issued profit downgrades earlier in the week.
The energy sector is currently weaker by more than 0.9% and is one of the day’s other worst performers. Overnight, the softening economic outlook painted in the Beige Book saw crude prices retreat by 0.7% to US$76.80. This in turn has seen some profit taking across the major energy names – Woodside Petroleum, Oil Search, Santos and Origin Energy are all down between 0.4% and 1.9%.
Stemming today’s losses to a certain degree has been the materials sector, which is presently trading 0.1% firmer. While the US materials sector was modestly lower, base metals (with the exception of nickel) were mainly higher. These higher metals prices and a generally more optimistic outlook for the major resources heading into next month’s reporting season, is allowing the sector to hold its ground amidst a mainly weak market. Heavyweight names, BHP Billiton and Rio Tinto, are off earlier highs but are holding onto gains of 0.4% and 0.2% respectively, while Fortescue Metals is down by just less than 0.5%. With gold arresting its recent slide overnight, albeit only marginally, Newcrest Mining and Lihir Gold both find themselves firmer by 0.5%.
In a nutshell though, it’s a fairly uneventful day on the local market. Yesterday’s highly anticipated CPI data has come and gone. The market now seems both comfortable (and relieved) that it can move forward through the next few months, without the constant speculation and uncertainty as to whether a rate hike is imminently around the corner. As we have previously suggested, we see the market being quite choppy, moody and indecisive, at least through until the end of August, when the Australian reporting season is complete. At that point, both local and US corporates would have provided their assessments of their prospects for the short to medium term. It will thus allow investors to make more informed decisions on whether equity weightings deserve to be scaled up over the remainder of the year.
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