australian stocks end flat tuesday as miners drag but banks push higher 1134402015

Australian stocks had a flat day Tuesday with the major indices ending up by just a couple of points. The benchmark index opened in the black and by noon, had moved up sharply to the day’s high of 5,856.70. The index, however, only flattered to deceive, because it thereafter fell sharply and by 15:00 had touched the day’s low of 5,811.70, well into negative territory. A weak rally in the closing hour, however, managed to push the market above the red line by a hair’s breadth.

According to Macquarie Private Wealth investment adviser John Milroy, quoted by The Australian, stocks gave up the gains they had accrued before noon after disappointing data on business confidence pointed to poor business conditions that were not responding to interest-rate cuts.

“People thought there would be another rate cut. But the implication was business conditions were so poor following the rate cut, the economy would continue to bubble at sub-trend levels — even if the RBA does cut rates again,” Mr Milroy said.

Indices and sectors

The benchmark S&P/ASX 200 on Monday rose 2.9 points, or 0.05 per cent, and closed at 5,824.2, while the broader All Ordinaries index was up 1.3 points, or 0.02 per cent, to 5,794.3.

The significant gaining sectors were information technology (+1.00 per cent), telecommunications services (+0.93 per cent), healthcare (+0.92 per cent) and industrials (+0.38 per cent). The big losers were consumer (-1.00 per cent), energy (-0.83 per cent), consumer staples (-0.58 per cent) and materials (-0.50 per cent).

Stocks

Tuesday’s trading was highlighted by the fall in mining stocks amidst a further decline in iron ore prices. BHP Billiton Ltd (ASX:BHP) fell 0.75 per cent to AU$31.91 and Rio Tinto Ltd (ASX:RIO) was down 1.1 per cent to AU$58.55. The smaller miners, however, fared much worse. Fortescue Metals Group Ltd (ASX:FMG) plunged 5.61 per cent to AU$2.02, Atlas Iron Ltd (ASX:AGO) was down 6.25 per cent to AU$0.150 and BC Iron Ltd (ASX:BCI) slumped 7.41 per cent to AU$0.375. Gold miner Newcrest Mining Ltd (ASX:NCM) fell 1.82 per cent to AU$12.42.

The banks however were a bright spot, and appeared to shrug off the morning report on Goldman Sachs’ cutting its outlook on the sector. Commonwealth Bank of Australia (ASX:CBA) was up 0.18 per cent to AU$90.68, Westpac Banking Corp (ASX:WBC) gained 0.83 per cent to AU$37.67, National Australia Bank Ltd (ASX:NAB) was up 0.35 per cent to AU$37.76 and Australia and New Zealand Banking Group (ASX:ANZ) gained 0.40 per cent to AU$35.30.

In energy, Woodside Petroleum Ltd (ASX:WPL) gained a mere 0.14 per cent to AU$34.89, other stocks ended up in the red. Origin Energy Ltd (ASX:ORG) fell 1.26 per cent to AU$11.76, Oil Search Ltd (ASX:OSH) was down 0.77 per cent to AU$7.70, and Santos Ltd (ASX:STO) fell sharply by 2.91 per cent to AU$7.33.

Investor and communication services provider Computershare Ltd (ASX:CPU) jumped 1.69 per cent to AU$13.27, a new record high. Telstra Corporation Ltd (ASX:TLS) gained 0.98 per cent to AU$6.20.

Airlines were up solidly, with Qantas Airways Ltd (ASX:QAN) gaining nearly 4 per cent to AU$2.90, while Virgin Australia Holdings Ltd (ASX:VAH) moved up 2.08 per cent to AU$0.490.

Economic news, currency and insight

NAB's closely watched business confidence index showed a three-point decline in confidence to 0 during February, indicating that business confidence had deteriorated notwithstanding the rate cut by the Reserve Bank of Australia, according to the ABC. Current business conditions were flat at a +2 reading. "Confidence in Australia's business community is now tracking at the lowest level since the federal election in 2013, with firms seemingly shrugging off last month's rate cut and instead focusing on recent negative political and economic news flow," said JP Morgan economist Tom Kennedy.

Meanwhile, the ANZ-Roy Morgan weekly consumer confidence survey showed that sentiment was at a three-month low as the index fell 2 per cent during the week ending March 8, according to The Sydney Morning Herald. ANZ chief economist Warren Hogan also noted the vulnerability of consumer mood to negative political and economic news. "Over the last year or so, there have been sizeable declines in consumer confidence in relation to any negative news around the Federal budget and economy, while potentially positive catalysts, such as the interest rate cut, lower petrol prices and higher asset prices have only really worked to offset the negatives," observed ANZ chief economist Warren Hogan, as quoted by The Sydney Morning Herald. "We suspect that elevated levels of uncertainty about the economic outlook are causing consumers to be unusually sensitive to negative news flow and this is weighing on confidence."

Overnight, on Wall Street, stocks declined sharply on rate hike fears after Friday’s stronger than expected jobs report. The Dow Jones Industrial Average fell 332.78 points, or 1.85 percent, to 17,662.94, while the S&P 500 lost 35.27 points, or 1.7 percent, to 2,044.16, its biggest daily percentage decline since January 5. The Nasdaq Composite dropped 82.64 points, or 1.67 percent, to 4,859.80. After yesterday’s fall, the Dow and S&P 500 have retreated into negative territory for the year, according to Reuters.

The Australian stock market is likely to open with losses today given that March ASX SPI200 Index (AP) Futures was down sharply by 47 points at 5,763.0 at 06:59 this morning (AEDT).

Fears of a rate hike as early as June pushed the US dollar to multi-year highs opposite the yen and the euro. The Australian dollar was not spared either and fell this morning to its lowest level in six years. At 07:00 this morning (AEDT), the local currency was trading at 76.18 US cents, down from 76.47 US cents yesterday.