- The index gained 13 points or 0.24% to close at 5519 on light volumes
- Retail sales surprised to the upside, rising 1.2% in September
- Myer rose 1.87% on these stronger spending numbers
By Saxo Capital Markets Australia
After experiencing a soft start to the month yesterday where we lost 20 points, our index today gained 13 points or 0.24% to close at 5519. Volume was light across the board today due to the Melbourne Cup.
The day was packed with economic releases with retail sales surprising to the upside, rising 1.2% in September. Our trade deficit more than doubled in September and the Reserve Bank of Australia kept the cash rate unchanged at 2.5%.
While a horse race kept volumes light today, the index finished ahead. Photo: Thinkstock
Myer, which is one of the most heavily shorted stocks on the Australian Stock Exchange (total book short 17%) was able to enjoy gains on these strong spending numbers. Myer rose 1.87% for the day to close at 1.19. Once a stock is shorted around this 17% level (near maximum shorting ability) a dangerous moment occurs when the company view turns around to "undervalued". That is, there is 117% of potential buyers in the market. Once supply outstrips demand, a pleasant rally can quickly occur.
As the price of gold held up overnight, we saw a strong bounce back in our gold companies: Newcrest Mining regained some of their previous day losses, closing the day up 15 cents or 1.74% to 8.76 after tanking 71 cents or 7.62% yesterday.
Rio Tinto, BHP Billiton and Fortescue all put in a positive performance, which ensured the Materials sector closed firmly in the green. Rio Tinto rallied 0.95% to close at 60.35, BHP Billiton closed 30 cents up or 0.89% to 34.01 and Fortescue Metals ended the day 0.9% higher at 3.38.
Our banks put in a mixed performance with the Commonwealth Bank of Australia and ANZ Bank the only two banks to close up for the day. They gained 0.31% and 0.21% respectively. National Australia Bank, which goes ex-dividend on November 7 (the same day as ANZ), shed 28 cents or 0.8% to 34.61 while Westpac lost 0.14% to close at 34.50.
Woolworths has again taken its place in the day's top losers list. Yesterday’s report showed that sales failed to meet market expectations, but a company the size of Woolworths can seldom be liquidated in just one trading day to rebalance national portfolios. Today the stock finished down 2.77%.
ResMed, one of Australia’s great medical companies, fell 1.17% to 5.91. Resmed is now based in San Diego and reports in USD. With the USD Index now at a four-year high, its next reporting of a global product indicates investors are preparing for a fall in earnings.
Over the coming days, the market overall is likely to experience light volumes as annual leave is generally taken in the days following Melbourne Cup.
The AUD was sold down to a key support level of 0.8646 as the market greeted strong retail sales figures combined with a weak trade balance. However, it quickly reversed losses to rally back up by more than 80 pips as the RBA’s cash rate was left unchanged and comments were welcomed by the Aussie bulls. This price action signals the strength of the support level of 0.8646, so the AUDUSD is expected to continue to strengthen in the European session. The resistance level to watch is at 0.8750 and 0.8800.
The SPI is trading in a consolidating range and after finding a bottom at 5485, has rallied up to break through the swing high of 5513 in our day session. This breakout proved to be a false break as it quickly gave back the gains.
This level of 5512 / 5513 will be the resistance for now, and since the SPI looks to be in an overbought area, provided the European session shows another weakness like yesterday, then the key support level of 5482 could be broken to provide further downside pressure.
-- Edited by Gayle Bryant
Australian Market Wrap is compiled by the Sydney trading desk at Saxo Capital Markets. Join the conversation below to be a part of the social trading phenomena.