- The S&P/ASX200 closed 0.21% higher at 5454.30 and exactly at the 200 DMA
- All of the four major banks finished the week lower
- A number of iron-ore companies reached 12-month lows
The S&P/ASX200 closed 0.21% higher for the day at 5454.30 and exactly at the 200-day moving average.
After four solid consecutive weekly gains, we gave up 1.7% for the week. The banks, which have been the strongest performers in the past weeks, have started to show signs of weakness.
Westpac traded ex-dividend on Monday and closed the week 5.2% lower. The Commonwealth Bank of Australia lost 1.2% for the week; ANZ Bank gave up 1.7% and National Australia Bank shed 1.6%. The trading desk feels we have seen the tops on these banks for now as the yield attraction has diminished with all the banks issuing dividends for the year.
For the week we also saw a number of iron-ore companies reach 12-month lows. Heavyweights such as Fortescue Metals gave up 3.2% for the week, BHP Billiton lost 3.5% while Rio Tinto shed 1%. Out of our commodity stocks, the desk favours Rio Tinto as we feel that the Glencore takeover story will continue to play out in the coming 12 months.
With seven weeks to go before year end, the question that is posed every year has come up again: will we see a Santa Claus rally? Although we feel that next week will be soft (the desk's view is that the banks are going to weigh on the markets for the rest of this month) we hold optimistic year-end views. Iron ore will stabilise as China enters a restocking period and our view is that there will be a reallocation of capital from banks to the resources sector. Our call is for material companies to lift markets into year end.
At this time of year, we ask whether we will see a Santa Claus rally. Photo: Thinkstock
Dulux (DLX) has recently been in the news over its suspicions of a price war in the "cheap paint" sector. It rose nicely after its 2014 annual report was published today, rising 3.12% to $5.29. Key highlights of its annual report are: revenue of $1.6 billion – a rise of 8.5%; net profit after tax before non-recurring items $111.9 million, up 21.4%, net debt to earnings before interest, taxes and amortisation is at 1.53x – down from 1.98x; and the total yearly dividend was 20.5 cents, up 17.1%.
Retail group Primary (PRY) today enjoyed a 1.75% lift in its share price to $4.65. This share-price improvement could be contributed to the assistant governor of the Reserve Bank of Australia speaking yesterday about how consumer spending would carry Australia through to drive the economy following the slowdown of mining.
In addition, an article today in one of Australia's leading newspapers highlighted Primary as one of the better retail investments, given its well-driven management team and growth opportunities of Wiggle in the UK.
Grain Corp (GNC) was today's largest loser, down a shattering 4.26% to $8.09. Today's move was unusual given their FY14 results were delivered yesterday morning but waited until today to be sold off. Other than GNC, all the others that fell were part of the energy sector, which has taken a beating every day this week and as a whole finished down 5.5% from Monday's open.
Meanwhile, the Aussie dollar tested the key resistance level 0.8760 overnight and after making a false break by only 4 pips, it sold off sharply below 0.8700 during the Asian session.
Failure to break this resistance level signals that AUDUSD could now sell down even further towards the previous support level 0.8650 as the USD continues to strengthen.
The SPI sold off breaking the previous day's swing low 5444. When it made the new fresh low of 5431, it rallied back more than 40 points on the back of a recovery in the big four banks, which helped shares manage their first day of gains for the week, as a continuing slump in oil prices put pressure on energy stocks. However, any weak numbers from tonight’s German gross domestic product may dampen this rebound. The interim support level is at 5450, while 5475 is the next resistance level.
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