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ASX Market Wrap: A resilient ASX and more evidence for a rate cut

The ASX shook off a poor lead from the Dow Jones and S&P 500 overnight to eke out a positive finish in Tuesday trading, ahead of the ANZAC Day holiday. The S&P / ASX 200 (Index: ^AXJO) (ASX: XJO) closed up 0.2% at 4,360.4 points and the broader All Ordinaries (Index ^AXAO), (ASX: XAO) closed up 0.1% to 4,433.9.

The Dow had finished the US trading day overnight down just under 0.8%, while the Nasdaq was off 1.0% and the S&P 500 down 0.84%. The ASX futures predicted a market drop of around 0.5%, but trade proved resilient with slight early losses quickly recovered, and at lunchtime the ASX 200 was showing gains of around 0.5% at lunchtime.

That was to be the high-point of the day’s trade, with gains fading in the afternoon session.

The main finance story of the day was always going to be the release of the Consumer Price Index (CPI) the main gauge of Australian retail inflation. Always eagerly watched, today’s release took on extra importance after the RBA signalled it was going to use that yardstick when it reviewed rates next week.

A lower than expected inflation read (the headline rate was a meagre 0.1% increase – the lowest in more than two years) had an immediate impact on the Australian dollar, pushing it down around a quarter of a US cent to the lowest level in a fortnight immediately after the announcement – an implicit sign that the market now believes the RBA will cut rates by at least 0.25% at the next meeting. The Aussie dollar was trading at 102.74 US cents in late afternoon trade.

Wesfarmers (ASX: WES) was the corporate story of the day on two fronts. Early focus was on its retail sales announcement, in particular the ongoing grocery war between its Coles division and the eponymous supermarkets of Woolworths (ASX: WOW).

Coles continued to dominate the sales growth battle, beating Woolies for the 11th straight quarter. Price deflation – some weather-related and some self-inflicted – pulled down sales growth, perhaps a sign that the easy gains from price decreases have passed.  The battle will no doubt continue to pressure the margins of the two majors, as well as the independent supermarkets supplied by Metcash (ASX: MTS)

Wesfarmers also advised the market it did not expect to be subject to the government’s mining tax unless there was a significant lift in the price of coal, according to the Australian Financial Review. CEO Richard Goyder did confirm the company would be between $30m and $40m worse off due to the impending implementation of the carbon tax regime.

Meanwhile, Westpac (ASX: WBC) subsidiary fired a salvo at the other banks with the launch of a smartphone app it is touting as a breakthrough for consumers, providing a more traditional internet-banking experience compared to current smartphone banking applications.

Newcrest Mining (ASX: NCM) continued the output downgrade parade, just the last of the major minerals businesses to reduce output and in the wake of similar announcements from BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO).

The Materials sector bore the worst of the day’s trade, closing down 1.1% followed by the Energy sector, off 0.5%. On the flipside, Telecomms had a great day, on the back of Telstra’s (ASX: TLS) 2.0% gain, with the sector closing up 2.1% and the A-REIT sector posted gains of 1.6% to be the second best performer on the day.

Mirabella Nickel (ASX: MBN) continued its yo-yo run of recent days, leading the gainers with a 5.3% rise, while Telecom New Zealand (ASX: TEL) joined its trans-Tasman cousin in the winner’s circle posting gains of 4.0%. Fellow utility provider SP Ausnet (ASX: SPN) gained 2.8%, while APA Group (ASX: APA) and Hastings Diversified (ASX: HDF) each put on 2.6%, the latter as takeover discussions continue.

The losers were led by Paladin Energy (ASX: PDN), down 6.3% in the wake of a US$274m capital raising, while AWE (ASX: AWE) fell 5.2%, Imdex (ASX: IMD) was off 4.0% and Macmahon Holdings (ASX: MAH) lost 3.9%.

The ASX will be closed for trading on Wednesday in observance of ANZAC Day.

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