Article / 29 October 2014 at 6:38 GMT

Australian Market Wrap: Materials benefit from sell off in banks

Trading Desk / Saxo Capital Markets
  • The S&P/ASX200 defied global leads to close down 4.9 points at 5447.7
  • The financials index weighed down the market losing 0.89%, led by Westpac
  • Westpac lost 2.03% and was the most-heavily traded top ASX100 stock

By Saxo Capital Markets Australia

Our local markets defied the strong leads received overnight and also went against the positive move in Asia. The S&P/ASX200 Index closed down 4.9 points or 0.09% to finish at 5447.7. 

Our big four banks, which make up 30% of our benchmark index did the weighing today as we saw the financials index lose 0.89% making it the worst-performing sector. Given the sheer size and market capitalisation of the big-four banks, it is very rare to see one of them in the leaders and losers board. Today though, Westpac (WBC) made a special appearance losing 2.03% to 34.17. (Westpac was also the most-heavily traded top ASX100 stock today in terms of value).

WBC looks to go ex-dividend on November 7 so don’t expect it to continue to fall, although keep in mind investors may choose to take their gains ahead of the ex-date so they’re not left with a potential sell-off.

The ANZ Bank lost 1.44% to close 32.93, Commonwealth Bank of Australia dropped 0.76% to 79.58, and National Australia Bank closed 0.64% lower to 34.38. National Australia Bank reports its full-year earnings tomorrow.

The market was readjusting its positions, taking recent capital gains in the financials and buying back in to the materials sector, which was the best-performing index today and supported the index from closing lower. The materials sector was up 1.25%. 

Fortescue Metals lifted 2.99% to 3.45, BHP Billiton added 1.38% to 33.78, and Rio Tinto rallied 1.05% to close at 59.65. Our goldies also contributed to the sentiment as we saw Newcrest Mining close 2.16% firmer to 9.91.

JB Hi-Fi today saw its biggest ever one-day price increase of 1.32, taking its shares to close at 16.10 for the day, up a very impressive 9%. With management upbeat about its trajectory in to the Christmas trading and positive sales data in September and October released during its annual general meeting, investors snapped up the shares today. 

Heavily shorted at 12.5% of the total book, the shorts scavenged to cover their positions, buying back whatever they could and at one point pushing the day's rise to 11.5%. At three times its normal trading volumes, the 2.3 million shares traded today at best will still see the book shorted 10%. These shorts, while predominately still in the black, will have to cover themselves at some stage. Keep this in mind for tomorrow's trading volume.

 Investors snapped up JB Hi-Fi shares today as the company experienced
its biggest one-day price increase to date. Photo: Thinkstock

Myer rose 1.88% and flying on the coat tails of JBH today, has a short book of 17.5%. At these levels, there is very little stock for the shorts to borrow to continue driving the price down. If no negative news comes out to keep MYR’s price down, they too may be ready for a short-term adjustment.

As per yesterday’s commentary on the ascending triangle pattern, AUDUSD broke through the resistance level of 0.8825 overnight and has been trading above it. This level could be tested and is expected to act as a support level, but tomorrow morning’s Federal Open Market Committee meeting will dictate the further direction of the USD and any hawkish comment would reverse the current rally of AUDUSD.

After having a strong overnight session, the SPI finally showed some weakness by selling off from the opening and closed towards the intraday low 5424. This may have been seen as a surprise, but considering the SPI has been outperforming other markets in the past 13 trading days or so, this kind of pull back was overdue. 

Resistance is at the recent swing high of 5478 and the support is at 5400. Tomorrow’s FOMC meeting will end the current quantitative easing – QE3 – and unless it comes up with another dovish comment, the SPI should erase even more of the recent gains.

– Edited by Gayle Bryant

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


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