Article / 15 October 2014 at 8:46 GMT

Australian Market Wrap: Telecoms and IT lead charge

Trading Desk / Saxo Capital Markets
Australia
  • Telecoms and IT sector lead 0.73% rise on Aussie stock market
  • Energy sector down 1.04% as oil prices continue to slide
  • AUD starts the day weak, but rallies back above 0.8700 

By Saxo Capital Markets Australia

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Australia's S&P/ASX200 Index gained 0.73% today to close at 5,245.60, led by the telecommunications and IT sector.

Australian telecommunications giant Telstra Corporation rallied a whopping 1.7% to 538.

The only sector to post losses was the energy sector, down 1.04% as oil prices continued to slide overnight.

The financials and materials sectors, which account for 45.46% and 16.47% of the ASX200 index respectively made solid gains for a second consecutive day. The financial sector posted an increase of 0.85%, with the materials sector up 0.62%.

The index saw some paring of gains made for Australia's top iron ore producers throughout the trading day. It looks like tomorrow could be a flat day for the materials sector provided iron ore (down 0.4% overnight) doesn't shoot up significantly overnight.

Fortescue Metals lost one cent to close at 3.64 after reversing a 14 cent gain made in the morning session. Rio Tinto gained 25 cents or 0.41% to 60.99 and BHP was the lead outperformer, rallying 1.05% or 35 cents to 33.80.

The market also cheered Rio’s third quarter operations review released early this morning which showed that its third-quarter production rose 13% as it expanded operations in Australia. Iron ore output was 60.4 million metric tonnes (versus an 60.8mn tonne median estimate) in the three months to September 30, compared with 53.4mn tonnes a year earlier.

Among the banks, Commonwealth Bank of Australia displayed the most strength, rallying 1.79% to 75.45, followed by Westpac, which was up 1% to 32.46. National Australia Bank put on just under a percent to 32.54. ANZ also followed the other banks higher, up 0.71% to close at 31.37.

Tabcorp Holdings put in a solid performance today, up 3.74% to A$3.61 after releasing an earnings statement for the first quarter of the 2015 financial year.

The entertainment and gaming company benefited from heavy betting during the FIFA World Cup, which lead an increase in revenue of 6.6% to A$537.4mn. 

Its key business sector, wagering, was the strongest performing unit, up 8%. TAH’s results clearly show it is a defensive stock given that Westpac Consumer Sentiment has been below 100 points for eight months straight now and NAB Business Confidence has fallen from its recent highs in July. Tabcorp trades on a price-to-earnings ratio of 21% with a market cap of A$2.75 billion.

Front-running Tabcorb today was Echo Entertainment, up 4.42% to A$3.54. Investors saw the strong performance of its competitor Tabcorp as a positive lead, and after weaker shareholder returns this year believed there was ground to be made up.

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Strong performance in its wagering sector has helped entertainment and gaming firm Tabcorp Holdings report strong earnings for the current financial year. Photo: Thinkstock.com

Weak energy 

Origin Energy was a victim today of Australia's weak energy sector today (Beach and Santos included) after Brent oil continued to tumble, making fresh lows of A$86.15 in the January 2015 futures contracts. Origin finished down 2.55% to A$14.12.

WorleyParsons, which some may have expected to rise with the mining firms also continued its fall, dropping 2.29% to A$14.31. The firm generates a substantial sum of revenue from its oil and gas sector. At today's current price though, it stands at a forward P/E of 12.2.

The SPI started the day session with a strong rally and broke through 5,200 level. The intra-day high was 5,235 before retracing back to 5,200 which turned into a support level. This intraday high touched the down trend line that stretches from the September swing high. 

The resistance level is 5,333 and 5,100 remains to be the key support level. Although SPI seems to be very resilient compared to the current bearish market conditions from Europe and US, downside risk still remains as the oil continues to make fresh lows and e-mini struggles to bounce back.

The Aussie dollar started the day weak and sold off through 0.8700. And then after finding the bottom at 0.8675 which is 20 pips above the key support level, it rallied back above 0.8700. Although AUDUSD seems to have found the double bottom, the choppy price actions are expected between 0.8800 and 0.8652.

– Edited by Oliver Morrison

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

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