Article / 05 February 2015 at 6:38 GMT

Australian Market Wrap: Banks, telcos take ASX to 7-year high

Trading Desk / Saxo Capital Markets
Australia
  • Market defies with 0.58% gain to close at 5811 - a new 7-year high
  • Myer hits targeted long position with a 9.3% return
  • AUDUSD shows strength and resilience trading above 0.7732

By Saxo Capital Markets (Australia)

Once again our markets defied the uncertain directions overnight to power higher by 33.66 points or 0.58% to close at 5811, reaching another 7-year high. The ASX/S&P 200 was taken higher by our banks and telcos and investors continued to pile up in our high yielding stocks. Telstra Corporation (our largest telco) lifted 7 cents or 1.06% to AUD6.67.

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Three banks closed today at record highs. Commonwealth Bank of Australia once again reached all time highs, closing the day on whopping AUD2.48 gain or 2.73% to AUD93.27. ANZ Bank added 1.04% to settle at AUD34.98 - another record high for this bank. Westpac underperformed her peers, lifting 0.58% or 21 cents to close at AUD36.44 - another record high as well. National Australia Bank rallied 1.29% or 36.97 to close 10 cents shy of its 2013 high.

In other financials, Macquarie Bank (our domestic investment bank) broke out of its resistance level of AUD62.49 closing the day 68 cents higher or 1.05% to AUD65.43 which is a 7-year high. AMP Limited also settled 1.85% higher to AUD6.05 which was its 5-year high. Look out for a trade recommendation on this stock tomorrow. Capping gains for our markets were our energy stocks and materials: the energy index sank 1.97% as the price of oil snapped its rally and the materials sector lost 0.82%.

Today our second and last profit target was reached on Myer Holdings where we were able to unwind our entire long position at a 9.3% return. See here.  For those who wish to hold onto their long positions, the next level to watch out for is AUD1.87.

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 Talking the walk: Telstra is moving up in line with market momentum. Photo: iStock

Today's victor was Myer (MYR) which was propelled 5.62% to finish the day at AUD1.785. MYR’s rally today was slowed a little with weaker than expected December retail figures, but pushed on in the lead up to their interim report. If it does not cut its dividend MYR is target to pay a 5% interim dividend and are currently trading on a P/E of 10.5! With the RBA cutting the Australian cash rate and anticipation for another cut before July 1, MYR looks to have the tides turning in their favour.

Echo Entertainment (EGP), which initially fell 2.3% on the day of its interim announcement, has today rallied 5.07% now doubt now that investors have time to properly digest its information in full. Our Energy sector today continues to remain at the mercy of the price of oil, down 1.97% in the six hours of trade. All our big players were caught up in the fall with Santos (STO), Worley Parson (WPL), Beach Petroleum (BPT) and Oil Search (OSH) down 3.23%, 3.07%, 2.98% and 2.83% to AUD8.09, AUD10.10, AUD1.14 and AUD8.23 respectively. As it stands, The US now has a new record level of inventory with 413m barrels in surplus.

Despite the Australian retail sales figure was disappointing, AUDUSD showed a lot of strength and resilience trading above 0.7732 but at the same time, the resistance level was held at 0.7800. We expect AUD to trade in the ranges of between 0.7851 and 0.7720, although the medium term outlook still remains bearish as AUDUSD is forming a temporary downtrend channel.

Shares have recorded an 11th day of gains, as CBA extends its rally and Westpac and ANZ reach record highs, offset by losses in miners and energy stocks. The ASX/S&P200 is still trading within the uptrend channel after making a fresh intraday high 5,790. The current strong bullish momentum is expected to continue while pull back would be possible at around 5,800 level.

-- Edited by Adam Courtenay

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



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