Afternoon Market Report
The ASX200 finished the holiday shortened week with a modest loss. Although the week will be remembered for the resurgent resource sector which helped the index gain in the range of 3.5%.
The main indicator of the Australian Securities Exchange (bottom R) is seen in red shortly after the local market opened in Central Sydney October 4, 2011. Australian stocks eased 0.6 percent on Tuesday, pressured by falls in global equities markets in a fresh flight from riskier assets, but losses were limited after steep declines on Monday. REUTERS/Daniel Munoz (AUSTRALIA - Tags: BUSINESS)
The resource sector was guided higher by the idea that the big miners could return more capital to investors. The catalyst for this thinking was the game changing announcement from Woodside Petroleum earlier in the week. Woodside announced a special fully-franked dividend of $USD 0.63 per share, along with increasing its target payout ratio to 80%. The increased returns to shareholders were well received by the market reflecting the scrapping of the Browse development at James Price Point. The conclusion being drawn by some quarters of the market is that BHP and RIO could follow in the footsteps of WPL and return greater levels of capital to investors.
There was a noteworthy performance for the gold stocks on Friday. Recent weeks have been marked by heightened volatility in miners of the yellow metal. Recent days have seen a recovery in gold prices. Newcrest Mining rose more than 3.5%, whilst Resolute Resources was up more than 11%
Another feature of the trading week was the lower than expected reading on March quarter inflation the figures confirmed the scope for lower rates from the RBA. The bottom line suggests that even in the absence of any cuts, rates are likely to remain lower for longer in the face of a benign inflationary environment. Whilst low rates are already priced into consumer related stocks the news was supportive for the group. On the heels of gains earlier in the week most of the leading names eased on Friday. Harvey Norman shares lost 2.3%, David Jones shed 3.2%% although JB HiFi finished with a gain of 0.2%
The main focus at the close of the week will be on the US. An advanced reading of QI GDP could be seen as slightly dated news. Although, given that the market is preoccupied with the fiscal tightening and the predicted midyear slowdown that is likely to follow, the concern for the markets is the degree to which Federal fiscal restraint has created head winds for the household sector. Any disappointment to US GDP growth however could be seen as a catalyst for the US Fed remaining in the game for longer when it comes to quantitative easing. Such an outcome is likely to see the US dollar come under selling pressure into the end of the week.
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