After taking a light breather on Friday the Australian share market on track to be back in the winner’s circle (and 11 out of 13 sessions higher) leading into the last hour of trade the ASX 200 was up 36 points. Given only flat lead from Wall Street, continued volatility from commodity markets and a limited day of economic releases it could have easily been expected that the market was going to trade flat or lower, but big news out of Woolworths was enough to continue to push market sentiment and the index higher. Market Turnover at 3:15pm was very low at only $2.4 billion with the low turnover trend continuing and a factor why I am cautious on the current rally at hand. We could see some market interest return on the back of the CPI data due on Wednesday which is likely to indicate the next RBA move while we will find out more of the stimulus expected out of the Bank of Japan when they meet on Friday....
Woolworths (+8.37%) with its biggest positive market moves seen in years on the back of the announcement of a major operating overhaul which will result in impairment charges of $959 million in what is seen as the first set in its recovery strategy. The restructure will see 500 jobs lost from support office & supply chain with $155 million the cost while a further $344 million tied to slowing the roll out of supermarkets and closing underperforming stores. While the market embraced the restructure of more importance is the outcome of what they will do with Masters with that decision to be made in the short term on what has been a disaster for the Woolworths operation.
Elsewhere around the markets, financial stocks back in play with the big banks all making good gains. ANZ (+0.67%), CBA (+0.82%), NAB (+0.46%), Macquarie (+0.22%) and Westpac (+0.69%) in the black. It will be interesting to see if the yield hunters of this current rally will continue to support the banks leading into the CPI number. As I pointed to last week, investors hunting for yield in the banks need to tread cautiously with still numerous uncertainties in the short term. Short term potentials include capital raisings, earnings & dividend cuts, Triple AAA Credit Rating cuts and other regulatory control issues.
Commodity stocks playing out as expected with volatility and weakness on Crude Oil & Iron Ore markets pushing local players lower.
Energy stocks with crude falling saw Origin (-0.67%), Oil Search (-0.55%), Santos (-2.69%) all trading lower with concerns for an oversupply of crude & geopolitical risks again major factors in its trading price.
Resource stocks also lower with BHP (-0.62%), Fortescue (+0.25%) and Rio Tinto (-0.29%) all lower as the spot price traded lower and ADR’s were sold off in overseas trading. They have run hard in the first half of the year so no surprise to see some profits taken given the spot volatility. It is an area we do continue to like in the short term however one area we are watching closely is the apparent rift developing in the upper echelons of the Communist Party in China driven by a sharp differences of opinion between the President and Premier about handling economic issues, which could have huge implications for the sector.