- Gold stocks lifted on the back of the gold strength over the weekend
- Financials offset gains made in materials and energy
- Uranium shares soared after Japan cleared the way to restart reactors
By Saxo Capital Markets Australia
Australian markets saw a tepid start to the week, as our financials index offset gains made in our materials and the energy sector. The XJO Index lost 0.45% or 25 points to 5524. Stand out performers were seen within the materials sector as gold stocks lifted hard on the back of the gold strength over the weekend.
As the price of iron ore broke a five-day decline, Fortescue Metals rose 1 cent for the day to close at $3.16 (it was up as much as 10 cents at its intra day high), Rio Tinto added 0.89% to end at $61.24 and BHP Billiton closed 0.55% firmer to $34.68.
Japan's rethink on nuclear power is good news for uranium miners downunder.
The focus of the day was on uranium companies as uranium prices and offshore producers’ shares soared after Japan cleared the way for restart of the first of the nuclear reactors shut after the March 2011 earthquake and tsunami.
Paladin Energy rallied 12.12% to 37 cents and Energy Resources was not far behind rising 9.88% to $1.335. The trading desk in Sydney sees further strength in the price of uranium as we anticipate the price of uranium to continue to rise on speculation of supply shortage.
For those wanting to diversify away from company risk, we are seeing demand in the URA: Global X Uranium ETF listed in the US.
Weakness in financials
For the remaining week, the desk sees continued weakness in financials, as the final Australian bank has issued its last dividend for 2014. Westpac Bank closed $1.37 lower to $33.47 (versus 92 cent dividend). ANZ Bank, which traded ex last Friday, lost 36 cents or 1.09% to $32.52. National Australia Bank, which also traded ex div with ANZ dropped 0.72% or 24 cents to close at $32.98. Commonwealth Bank of Australia was the best performer. It was down just less than a quarter of a percent to $82.56.
Newcrest Mining (NCM) was up 5.46% to $9.27 today when gold rose an impressive 3% on Friday night. The US nonfarm payroll figure came out weaker than expected and gave the oversold precious metal a reason to regain ground. A weakening USD also allowed any international investor who was looking at gold an opportunity to buy.
Beach Petroleum (BPT), another company that has recently suffered from the decline of its underlying commodity, shined today, and rose 2.53% to $1.165
. Beach has well and truly breached its $1.30 floor and will now look to its $1.09 low in June 2013 for support. The next few days will be crucial in determining its continued direction.
Monadelphus (MND), which has been having a hard time in this economic shift away from mining, lead the decliners for the day. It was down 2.63% to $11.49. This has set a new five-year low for the resources company, breaking its support levels of $9.80 in late 2009 and early 2010.
US impact on currency
Although nonfarm payroll missed expectations, the figure was still quite a optimistic number along with the lower unemployment rate. However, the US dollar sold off on the back of this, and the Aussie dollar is making a solid uptrend since it made a new low 0.8539 on Friday. It broke through the resistance level 0.8650 and looks likely to trade above it in the meantime. The next key resistance level is at 0.8750, which has been very strong throughout November. Downside pressure still remains until this resistance level is broken.
Even though the Chinese trade balance was very positive, the SPI looked weak from the open. When China's market opened strong, the SPI found a bottom at 5,513 and quickly rallied back up towards 5,550. The US stock market still seems to be resilient and unless it shows some kind of weakness, and the SPI is expected to be consolidating rather than reversing the current uptrend. This week’s G20 meeting and progress on signing an Australia-China free trade agreement should provide some optimistic sentiment, so the real test of the current rally would be around the resistance level 5,600.
-- Edited by Robert RyanAustralian Market Wrap is compiled by the Sydney trading desk at Saxo Capital Markets