Article / 30 October 2014 at 7:21 GMT

Australian Market Wrap: AUD takes a plunge but equities buoyant

Trading Desk / Saxo Capital Markets
  •  AUD takes a plunge after Yellen's hawkish speech at FOMC
  • Coca-Cola Amatil (CCL) to sell 29.4% of its Indonesian arm
  • Insurance Australia Group also produced strong premiums data

By Saxo Capital Markets Australia

The Australian market today had a surprising climb today after a weak US lead. The market gain is attributable to Wesfarmers corporate update, NAB's determination to rid themselves of their toxic UK assets and Coca-Cola's $US500m, 29.4% sale of struggling Indonesian arm to Coca-Cola Co. The banks which were down yesterday all saw green, while the miners buoyant yesterday turned red.

Overnight the much-vaunted Federal Open Market Committee meeting took place where Janet Yellan was deemed to have spoken hawkishly. While QE3 was brought to an end, it was reiterated that low interest rates would remain in place for some time until the US economy improves. The affect on the AUD was an almost instant decline from its recent high of 89.11c to below 88c.

Echo Entertainment (EGP) was today's top leader up 6.21% to $3.76 following a trading update news release. Key highlights from the update include: normalised EBITDA was up 23-31% from the corresponding period and YTD normalised gross revenue was up 27% for the group and 36% at The Star.

 Gambling has paid dividends for Echo Entertainment. Photo: Thinkstock

Coca-Cola Amatil (CCL) today announced their plans to sell 29.4% of its Indonesian arm to Coca-Cola Co for the handsome sum of $US500 million. The wider strategy was to cut costs and restore sales and earnings. CCL finished the day up 4.49% to $9.07.

Insurance Australia Group (IAG) also produced strong data at their AGM today. Key data that was presented include: written premiums up 3%, insurance profit up 11%, reported margins up 18.3%, net profit after tax up 59% and dividends up 8%. IAG closed at $6.45, up 2.54%.

On the other side of the coin, Downer EDI (DOW) today pulled back from its magical winning streak, down 3.57% to $4.59 today on no real news. This too appears to be why JB Hi-Fi also made an appearance on the day's fallers, adjusting for yesterday’s stellar performance by losing 2.8% to $15.65.

The AUD pushed through the swing high of 0.8900 and reached as high as 0.8911, but quickly pulled back and sold off hard, losing more than 100 pips after the hawkish statement from the FOMC meeting. The interim resistance is at 0.8825 and AUDUSD now looks to have made a clear double top at 0.8900, therefore further downside risk is expected.

Despite weak leads from the US market, the S&P/ASX200 rallied from the open but found resistance at 5,460 and closed the session near this intraday high. The uptrend that started from the beginning of this month looks to be broken, but there is possibility the S&P/ASX200 can test the recent swing high of 5,478, because the Chinese composite index has now rallied more than 4% in the last 3 days. This could be one of the main reasons why the stockmarket has been strong compared to the US markets.

-- Edited by Adam Courtenay

Australian Market Wrap is compiled by the Sydney trading desk at Saxo Capital Markets

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