Australian Stocks: What Happened Today?

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By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The scoreboard:

–          The ASX200 closed on its lows to close up 8 points or 0.2% to 4583

–          The AUD held strong overnight gains, currently reading 1.0528 vs the USD

–          Total volume was strong at over $5B

Shares on the ASX200 continued to climb today, pushing through 4600 to fresh 16-month highs in early trade before closing close on its lows after the defensives dragged the broader index lower. The market opened with conviction across all sectors before a report that the lunatics in North Korea had launched a ballistic missile toward Japan swirled through markets and took the shine off the early move. Bullish economic data out of Germany had the DAX hitting its highest level since early 2008 and helped other European markets and Wall Street push out healthy gains.

A big news story for the morning was the Aussie dollar jumping above 1.05 against the greenback as confidence of a rebounding China got traders confident about prospects for Australian equities in 2013. Improving sentiment in the global growth story pushed the AUD to near three-month highs, despite the negative domestic outlook. The main driver offshore was the German business sentiment index which rebounded strongly to a seven-month high. German’s are traditionally rather conservative, perhaps overly pessimistic and if they seeing bullish signals then they must be seeing something good right? Well that was the way the market interpreted the news at least which bolstered Euro markets and flowed through to strong buying of the AUD which is widely known as a good barometer for confidence surrounding global growth.

Cyclicals again stole the show as the risk-on trade gathered even more momentum. BHP Billiton ((BHP)), Rio Tinto ((RIO)), Fortescue Metals ((FMG)) and Woodside Petroleum ((WPL)) all rose between 1-2%.

Some strength in BHP and WPL can be attributed to BHP’s sale of its stake in the proposed Browse gas-export project in Australia to PetroChina. Browse operator and major stakeholder WPL jumped on the price implications of the deal.  

High-yielding defensive stocks saw more profit taking with Telstra ((TLS)) down 1.4%, ANZ Bank ((ANZ)) down 0.8%.

Everyone is taking notice of our market’s breakout and confident push through the 4550 resistance level to new 16-month highs. Markets generally appear like they will push higher as the Fiscal cliff saga seems to have eroded to a mound and positivity surrounding a rebounding China has investors feeling good.

The big question is whether the move into cyclicals will be from a defined switch out of the defensives OR fresh cash out of term deposits due to a lower interest rate environment. A best guess would be a mix of both.

The reaction of currencies and precious metals will be closely watched ahead of tonight FOMC decision regarding expansion of the current QE plan. Any expansion of QE will likely see gold move higher as has been seen in recent years.

DOW futures are pointing to a negative opening, currently down 11 points 
 

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.

708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

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This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

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