- News from the Bank of Japan gave a late boost to the markets
- The S&P/ ASX200 closed up 0.92% to 5526
- The highlight of the month was the reverse in fortunes of the banks
It was a magnificent close for our markets today boosted by the unexpected news of the Bank of Japan increasing its monetary easing policy, coupled with an increase in purchases of riskier assets. This news hit 30 minutes before our market close and ensured we capped the month of October with strong gains after reaching an eighth month low on October 13.
The S&P/ASX200 (XJO) Index rallied 50.4 points or 0.92% to close at 5526. For the month of October, our index gained 4.42%. We are now 152.9 points away from the six-year high reached in August of this year.
The highlight of the month was clearly the reverse in fortunes seen in our banks as the hunger and appetite for yield came back into play. The two banks that have reported this month: ANZ and NAB (Westpac reports on Monday) exceeded analysts' expectations and put further pressure on the short sellers to unwind their short bets.
The trading desk here in Sydney expect the banks to continue to climb modestly into their respective ex-dates and thereafter experience some selling pressure at least till the third week of November. Commonwealth Bank of Australia remains our top pick as the underperformer in the coming two weeks.
National Australia Bank rallied 1.01% or 35 cents to close the day at 34.99. Westpac lifted 0.93% or 32 cents to 34.78, ANZ Bank rose 24 cents or 0.72% to 33.50 and Commonwealth Bank of Australia was up 31 cents or 0.39% to 80.48. One key level to watch on CBA is 80.95 where we expect technical traders to enter the market to short sell the stock.
Relative to the market's strength, our commodity heavyweights underperformed for this month. For the month of October, Rio Tinto put on 1.4% and BHP remained virtually unchanged.Today Rio Tinto gained 1.87% to close at 60.41, BHP Billiton added 1.22% to 33.96 and Fortescue Metals was up 1.74% to close at 3.50. We expect the materials sector will outperform the market as a whole as soon as our banks go ex-dividend and this is something we expect to continue until January.
It was nice to see Henderson Group (HGG) rally today. It was up 5.5% on the back of its third-quarter interim management statement today. After shedding 27% from late July to mid October, investors will have enjoyed reading key points that showed assets under management were up 2.5% to GBP 76.6 billion; net inflows were GBP 1.4 billion, driven by momentum in UK retail, positive European retail and global institutional flows and; investment performance has been strong with 71% of funds outperforming over one year and 83% over three years.
Newcrest Mining (NCM) held its annual general meeting. With the results and outlook provided by management, its share price tumbled: down 4.51% to 9.30. With gold down 1% overnight and now continuing to fall following the Japanese quantitative easing expansion, NCM has broken its support levels of 9.60. Investors should watch for opportunities to short NCM in the short term.
The AUD traded in a relatively tight range between 0.8850 and 0.8800 during the day, but when the Bank of Japan announced the unexpected monetary easing, AUDUSD sold off below 0.8800.
Although not directly related to the USDJPY, since it broke through the 110 resistance level, USD now looks to have confirmed the bullish direction for the near future at least. Therefore, the AUDUSD is expected to be under the downside pressure. The key support level is 0.8750 and this looks to be tested overnight.
The SPI opened strong but could not break through the key resistance level of 5500 twice during the day session. When the BOJ came out with the surprising news on quantitative easing, it broke through the level and closed at the intraday high 5518.
The next resistance level is at 5529 which is the 76.4% retracement, while interim support looks to be 5500. Now this BOJ announcement boosted the market sentiment, E-mini may even break through the record high 2014.50 tonight and SPI is expected to follow it.
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