Article / 08 December 2014 at 7:17 GMT

Australian Market Wrap: Banks up despite tough report, Qantas soars

Trading Desk / Saxo Capital Markets
Australia

  • Strong direction from Europe saw the market finish up 0.66% to 5348.9
  • Investors rewarded Qantas with a 13.81% share price jump
  • Blue chip bank shares edge up despite tougher capital rules

By Saxo Capital Markets Australia

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The Australian market had strong direction from Europe today, finishing up 0.66% to 5348.9 after a slight sell-off late in the day. Europe was up across the board following the imminent European Central Bank policy easing, as mentioned on Friday. On the other side of the Atlantic, The US published impressive payrolls for November, surpassing the expected 230,000 increase with a November jump in jobs that soared to 321,000. Surprisingly the US gave up a 2% gain to finish the day up only 0.2%.

Australian banks today benefited from yesterday’s publishing of the Murray Report. The wait for the report had led to investor uncertainty about how the recommendations would impact the profitability of the big four banks. Even though one of the most talked about points – the increased Tier 1 capital requirement will require the banks to raise another $24 billion in capital  – investors now know the worst and they have put their fears behind them by buying up bank shares.



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Competition from rivals such as Virgin-owned Tiger has taken a bite out of its domestic market, but Qantas has bitten back with cost-cutting moves that have boosted profits. Photo: Thinkstock
 

ANZ Bank finished the day up 0.93% to $32.40, Commonwealth Ban of Australia also up 0.92% to $82.39, National Australia Bank shares soared by 1.76% to $32.97 and Westpac showed a strong 1.03% gain, ending at $33.35.

Iron ore prices fell 0.7% overnight to $71.77, which hurt the miners. BHP closing the day down 1.05% to $30.10, FMG down 0.75% to 2.66 and RIO almost flat at 4:10pm down 0.02% to $57.13.

Flag carrier soars

Qantas (QAN) was today's clear leader when it comes winners, with an exciting 13.81% share price rise to $2.39. The flying kangaroo released a market update on its first half profit guidance. Key points to take away from their announcement were: PBT range now between $300 million to $350 million for the first half; all cost-cutting targets met or ahead of schedule; and lower fuel prices to add $30 million to its bottom line.

Electronics and music retailer JB Hi-Fi (JBH) struggled today in breaking their resistance level of $16.50, falling 2.01% to finish this Monday 8th Dec at $15.59. JBH has been dancing between $16.50 and $15.50 since the beginning of November. Traders should keep a close eye on its next break out, which is due shortly.

The Aussie dollar broke through the downtrend line that held last Friday on the back of the strong Non-Farm Payroll number and then continued selling off, making new lows when it gapped down below 0.8300 earlier this morning. Further downside pressure looks  likely to remain in play, towards the next support level at 0.8200, as the strength of the US dollar maintains its bullish momentum.

The SPI had a strong start of the week by pushing up above the resistance 5,400, although it did not last long above this level. The SPI still looks relatively undervalued compared with other major indices, so it is expected to gain more ground to the upside, as the major banks are leading the charge at the same time. Tonight’s German industrial production figure could come as another confirmation of current positive market sentiment.


– Edited by Robert Ryan

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

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