the asx 200 makes it into positive territory by a hairs breadth aided by retail stocks 1110042015

The Australian stock market traded well into negative territory for most of the session yesterday, with the S&P/ASX 200 touching its lowest point of 5,869.20 just before noon. However, a technical ‘inverted head-and-shoulder’ reversal led to a sharp rally in the last couple of hours of trade, helping the index to a face-saving gain of 2.6 points.

The big miners and financial shares were the culprits responsible for the fall in the index in the first half of trading, but short-covering in retail and supermarket stocks helped drive the late afternoon rally that took the index into positive territory by just a sliver.

"The market's had a good run,” said Paul Kasian, head of asset management at Equity Trustees. “It's not looking cheap and there is profit taking going on in various sectors."

Indices and sectors

The benchmark S&P/ASX 200 gained 2.6 points, or 0.0 per cent, and closed at 5,904.2, while the broader All Ordinaries index was up 2.2 points, or 0.0 per cent, to 5,873.7.

The significant gaining sectors were consumer staples (+1.32 per cent), information technology (+1.15 per cent), utilities (+0.55 per cent) and industrials (+0.30 per cent). The big losers were materials (-0.39 per cent), real estate investment trusts (-0.30 per cent), energy (-0.17 per cent) and healthcare (-0.14 per cent).

Stocks

Retail stocks were the star performers of the day following the release of healthy retail sales statistics for the month of January. Woolworths Ltd (ASX:WOW) gained 1.64 per cent to AU$29.83, Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, was up 1.18 per cent to AU$43.77 and Myer Holdings Ltd (ASX:MYR) shot up 4.05 per cent to AU$1.67.

Amongst miners, BHP Billiton Ltd (ASX:BHP) fell 0.45 per cent to AU$33.16, Rio Tinto Ltd (ASX:RIO) lost 2 per cent to AU$81.15, Fortescue Metals Group Ltd (ASX:FMG) was unchanged at AU$2.29, and Atlas Iron Ltd (ASX:AGO) plunged 2.78 per cent to AU$0.175. Iron ore prices are heading inexorably towards a fresh six-year low, according to The Australian. Benchmark iron ore for spot delivery at Tianjin China last traded as low as US$59.30 per tonne, down 4.5 per cent from the previous close of US$62.10 per tonne. The announcement by the Chinese government of a lower economic growth target of around 7 per cent, down from 7.5 per cent, laid a pall of gloom on the resource sector.

Energy stocks closed mixed. Woodside Petroleum Ltd (ASX:WPL) was up 0.37 per cent to AU$35.23, Origin Energy Ltd (ASX:ORG) fell 0.16 per cent to AU$12.26, Oil Search Ltd (ASX:OSH) was up 0.12 per cent to AU$8.08, and Santos Ltd (ASX:STO) fell the most, down 1.01 per cent to AU$7.85. Investors eyed Woodside Petroleum Ltd (ASX:WPL) favourably after it received the green light from the Australian Competition and Consumer Commission for the purchase of AU$3.5 billion worth of gas assets from Apache Corporation (NYSE:APA). Horizon Oil Ltd (ASX:HZN) shot up 7.69 per cent to AU$0.140 and was the top gainer on the S&P/ASX 200.

Except for National Australia Bank Ltd (ASX:NAB), which gained 0.03 per cent to AU$38.10, the other three big banks were all in the red. Commonwealth Bank of Australia (ASX:CBA) slipped 0.01 per cent to AU$91.12, Westpac Banking Corp (ASX:WBC) was down 0.21 per cent to AU$37.83, and Australia and New Zealand Banking Group (ASX:ANZ) fell 0.06 per cent to AU$35.50. However, Macquarie Group Ltd (ASX:MQG) was a firm spot in financials, jumping 1.33 per cent to AU$74.50 after the company concluded, and financed, a deal to purchase 90 passenger airliners.

Economic news, currency and insight

The latest set of data out of the Australian Bureau of Statistics showed retail sales rising 0.4 per cent in January to AU$23.88 billion, according to ABC. "The retail trade 'pulse' was fairly weak over the final months of 2014, with average monthly growth of just 0.2 per cent over October to December," Deutsche Bank chief economist Adam Boyton said, as quoted by ABC. "The step up to 0.4 per cent in January is therefore encouraging. Looking ahead, we think there is a reasonable prospect of a lift in the retail sector, especially given lower petrol prices, lower interest rates and signs of renewed strength in the housing market." The data spurred a sharp lift in retail and supermarket stocks yesterday.

International trade figures for January released by the Australian Bureau of Statistics showed that Australia’s trade deficit doubled to AU$980 million, as the value of imports rose by 3 per cent owing to a cheaper Australian dollar while exports grew only 1.3 per cent, according to ABC.

Analysts at investment bank UBS raised their target for the S&P/ASX 200 by 3.5 per cent to 5,900 points from 5,700, following a reduction in its forecasts for year-end bond yields, according to The Australian. “We don’t see the market as particularly attractive at current levels, with the possibility of a back-up in long bond yields and the possibility of weaker commodity prices looming as potential corrective risks,” said UBS equity strategists David Cassidy and Dean Dusanic.

The iron ore glut is likely to get much worse according to latest statistics from Port Hedland, the world’s biggest bulk export terminal, which showed a monthly throughput of 48.8 million tonnes of iron ore in February, up 14.8 per cent from the year ago period. On a daily basis the terminal shipped a record 1.27 million tonnes of iron ore in February, up from the previous record of 1.21 million tonnes per day in September, as per The Australian.

The Australian dollar weakened afresh as the market factored in new comments from the Reserve Bank of Australia, the impact from Eurozone quantitative easing scheduled to commence Monday and the slump in iron ore prices. “Global developments have left us with a higher exchange rate and lower interest rates than would otherwise have been the case,” RBA deputy governor Philip Lowe said in a speech in Sydney Thursday, and quoted by Bloomberg. “We may not like this configuration, but developments abroad give us little choice.” At 07:20 this morning (AEDT), the Australian dollar was trading at 77.69 US cents, down from 78.21 US cents yesterday, according to PerthNow.

The local stock market is likely to open higher today considering the March ASX SPI200 Index (AP) Futures was trading up by just 4 points to 5,894.0 at 07:59 this morning (AEDT).