Index dips as banks and miners lose ground

IT WAS a mixed day on the sharemarket, with financial and materials stocks weighing on the benchmark index as investors' attention turned from some solid local earnings to the continuing problems in Greece.

By InvestSMART · 29 Feb 2012

By InvestSMART ·
29 Feb 2012

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The S&P/ASX 200 Index shed 4.7 points to 4262.7.

CommSec market analyst Steve Daghlian said the market had little to work with after a weak lead from US markets overnight.

The German parliament overwhelmingly approved a second loan package for Greece, but that was expected, Mr Daghlian said.

Mining and financial stocks, which represent about 60 per cent of the Australian market, were lower. ANZ was the weakest of the big four banks, losing 20?, or 0.9 per cent, to $21.88. National Australia Bank fell 20?, to $21.88, Commonwealth 29? to $49.15 and Westpac 3? to $20.68.

Telstra rose 4?, or 1.2 per cent, to $3.27 after the competition watchdog approved plans to split the company in two. EL & C Baillieu Stockbroking director Richard Morrow said the decision was a "huge landmark" that put "a lot of confidence back into the Telstra market."

BHP Billiton was 7? softer at $35.75 while Rio Tinto gained 30? to $67.70.

This reporting season has seen "cyclical" stocks those that rise and fall with economic growth significantly re-rated to represent the pick-up in domestic economic activity.

As the financial house Goldman Sachs points out, large-cap industrials with exposure to domestic conditions are up about

18 per cent since January 1, outperforming defensive stocks by 15 per cent.

That has given some of Australia's retailers cause to cheer, with the industry enjoying a decent rally this month, due largely to the cyclical bounce over summer, the chance of rate cuts and the prospect of further mergers and acquisitions (such as Billabong).

Over the past seven weeks, retailers Harvey Norman (up 12.2 per cent), Myer (up 16 per cent), and the Reject Shop (up 14.5 per cent) have risen substantially.

And Kathmandu, the hiking and outdoors retailer, has had its second-best monthly rise since it listed on the ASX in November 2009. Up 18.9 per cent since February 1, the company has clawed back some losses from the preceding three months (-1.8 per cent in November, -29 per cent in December and -3 per cent in January).

When it had its last profit warning, in December 2010, Kathmandu shares bottomed out at $1.20. Yesterday they closed at $1.51.

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Frequently Asked Questions about this Article…

What happened to the S&P/ASX 200 index today and why did it dip?

The S&P/ASX 200 slipped 4.7 points to 4,262.7 in a mixed session. Financial and materials stocks weighed on the benchmark as investors reacted to weak leads from US markets and renewed concerns about Greece, even after Germany approved a second loan package.

Why did bank and miner shares lose ground on the ASX today?

Banks and miners were lower because investors moved attention from some solid local earnings to ongoing problems in Greece and a softer lead from overseas. Mining and financial stocks make up roughly 60% of the Australian market, so weakness in those sectors pushed the index down.

Which of the big four banks was hit the hardest and how did the others perform?

ANZ was the weakest of the big four, falling about 0.9% to $21.88. National Australia Bank, Commonwealth Bank and Westpac were also lower, with the report showing NAB around $21.88, Commonwealth at $49.15 and Westpac at $20.68.

How did Telstra shares react to the competition watchdog approving a split, and what does that mean for investors?

Telstra rose about 1.2% to $3.27 after the competition watchdog approved plans to split the company. Market commentary called the decision a 'huge landmark' that restored confidence in Telstra, which could be meaningful for investors watching potential structural change and value re-rating.

How did major miners like BHP Billiton and Rio Tinto move during the session?

BHP Billiton was softer, trading near $35.75, while Rio Tinto gained and was around $67.70. The moves reflect mixed sentiment across the materials sector on the day.

Why have Australian retail stocks rallied recently and which retailers have done well?

Retailers have benefited from a cyclical bounce in domestic activity, the prospect of interest rate cuts and talk of mergers and acquisitions. Over the past seven weeks the report highlights strong gains for Harvey Norman (up about 12.2%), Myer (up about 16%) and The Reject Shop (up about 14.5%).

What are cyclical stocks and how have they been performing this reporting season?

Cyclical stocks are businesses that rise and fall with economic growth. According to the report and Goldman Sachs commentary, large-cap industrials with domestic exposure are up about 18% since January 1, outperforming defensive stocks by roughly 15% as investors re-rate companies to reflect a pick-up in domestic activity.

How has Kathmandu’s share price changed recently and what should everyday investors note?

Kathmandu has had a strong recovery, rising about 18.9% since February 1 — its second-best monthly rise since listing in November 2009. That recovery has helped claw back earlier losses (November -1.8%, December -29%, January -3%). The stock previously issued a profit warning in December 2010 when shares bottomed at $1.20; the report notes it closed at $1.51 yesterday.