Article / 13 May 2015 at 9:00 GMT

Australian Market Wrap: Federal budget a hit

Trading Desk / Saxo Capital Markets
Australia
  • Federal budget release boosts Aussie markets
  • Retail surges on new small business benefits
  • AUDUSD sees resistance at 0.80

By Saxo Capital Markets Australia
Untitled
 
The Australian market cheered the overnight budget release by the federal government today, shaking off weak leads from offshore stocks.

Led by discretionary spending retailers, the S&P/ASX200 index rose by 40.37 points or 0.71% to 5.715.10.

The index opened quite flat but finished strong, closing near the intraday high 5,715 on the back of retail stocks (which were boosted by the federal government's small business package with its $20,000 instant tax deduction).

Today’s continuation of the rebound is suggesting that positive sentiment is growing along with the budget release. The next resistance level sits at 5,761 while the support level is at 5,671.

Shares in JB Hi-Fi and Harvey Norman (both operate in electronic goods) rallied on the news that products worth up to $20,000 used to run a business – such as cars, fridges, coffee machines, tables and chairs, printers, hot water units, and computers – would see an immediate tax deduction. 

Office supplies
These things add up. Photo: iStock

The ASX 200 consumer discretionary index advanced for a fourth day in its longest streak since January 30.

Supermarket operators Woolworths Ltd and Wesfarmers Ltd lifted 2.63% and 1.49% respectively on slightly higher volume than the previous trading session.

Australia's financials were also rock solid with National Australia Bank bouncing back from its modest losses yesterday to AUD 35.65, up a whopping 3.21% as the market continues to view its shares with positive sentiment following its rights issue. 

ANZ Bank rallied 2.16% to AUD 33.11 and Commonwealth Bank of Australia lifted 1.33% to AUD 83.98. Westpac Bank shed AUD 79 cents after trading ex-dividend for AUD 93 cents to close at AUD 33.27.

Materials were flat: BHP Billiton lost AUD 3 cents to AUD 32.50, Rio Tinto dropped AUD 23 cents or 0.39% to AUD 59.02 and Fortescue Metals lost AUD 0.06 or 2.33% to close at AUD 2.51.

The energy sector continued its march higher as the price of oil strengthened again overnight. Origin Energy closed 1.71% higher to AUD 13.10, Oil Search Ltd dropped AUD 0.02 to AUD 7.71 and both Santos Ltd and Woodside Petroleum added 0.58% for the day. 

Myer was Australia's standout performer today, up an impressive 10.28% to AUD 1.555. Myer’s share price benefited on two fronts today. The first was the publishing of their third-quarter sales. Key financial information included: a 2.4% increase in total sales for Q3 to AUD 661.8 million; Comparable sales were up 1.7% (year-over-year) to AUD 2,425.3m, and four major refurbishments and two new stores contributing to the companies increased sales. 

The second boost to market sentiment on Myer came by means of the federal budget released last night. With the government targeting economic stimulus through small business, a boost in both consumer and business confidence will follow. With the market showing where it considers a rock-bottom share price to be, the veil uncertainty – while not yet lifted – is showing signs of moving in the right direction.

While not in the ASX100, Sirius Resources deserves a special mention after climbing 5.52% to AUD 3.25. Sirius gave an update on its Nova-Bollinger nickel-copper mine which was notably well received. The Nova mine holds world significance for its nickel-copper sulphide resource and has AUD 650m on hand through cash and debt to continue financing exploration, capital expenditure and sales. 

This update will go hand-in-hand with Chinese industrial production data.

Westfield lost 1.81% to close the day at AUD 9.20. Westfield released its shareholder review this afternoon and shares immediately headed south. Key deals from the report include: AUM of AUD 28.5 billion; AUD 11.4bn in development; AUD 17b in annual retail sales; 7,400 retail outlets, and 435m customers visiting 40 of the company malls annually.

The market reaction to last night’s budget has so far been fairly limited. AUDUSD rallied overnight shortly after its release, but couldn’t break through 0.8000. This level, however, was broken today and AUDUSD made an intraday high at 0.8010. 

The wage price index did not have much impact on AUDUSD but soft Chinese industrial production and retails sales figures pushed AUDUSD lower. At the moment, 0.8000 remains as the resistance level and AUDUSD is expected to show weakness unless we see a clear breakout above 0.8026 which would confirm further upside momentum.

— Edited by Michael McKenna

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

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