Lament for second-slowest day of the year

Analysts blamed the midweek Anzac Day holiday for the sharemarket session yesterday.

By InvestSMART · 24 Apr 2012

By InvestSMART ·
24 Apr 2012

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Analysts blamed the midweek Anzac Day holiday for the sharemarket session yesterday.

ANALYSTS yesterday blamed the midweek Anzac Day holiday for the sharemarket session yesterday being the second-slowest of the year by value of shares traded.

With just $2.65 billion worth of trades on the S&P/ASX 200 Index, the only day when the market has performed worse this year was the first trading day of 2012, when turnover was $1.8 billion.

Analysts said investors were naturally cautious before the release today of crucial inflation data, but that the midweek holiday had scared off the large institutional investors, which kept the bigger trades away.

''This week will be another write-off,'' Goldman Sachs' Richard Coppleson said, ''but [after] this week we should slowly see things pick up.''

The benchmark index closed down 14.1 points, or 0.3 per cent, at 4352.4 points.

The positive leads from Wall Street and European markets failed to prevent the market losing ground, with most sectors performing poorly.

The falls were led by the materials sector, which ended 0.7 per cent lower, while industrials dropped 0.6 per cent, financials ended flat, and telcos rose 0.6 per cent.

But pockets of strength could be still found in higher-yielding, dividend-paying sectors, including telcos and financial stocks.

Commonwealth Bank was up 1? at $50.95, ANZ gained 1? to $23.46 and Westpac rose 4? to $22.14. However, NAB slipped 11? to $25.08.

Telstra finished 2?, or 0.6 per cent, better at $3.40.

''We could see a rally if the March-quarter consumer price index data [today] comes within expectations,'' said Macquarie Equities division director Lucinda Chan.

Analysts expect the key measure of underlying inflation to show a rise of 0.6 per cent for the first quarter, nudging the annual rate down to about 2.4 per cent, comfortably within the Reserve Bank's long-term target band of between 2 and 3 per cent.

The RBA has indicated it will consider cutting the 4.25 per cent cash rate at its next policy meeting on May 1, providing inflation numbers are tame.

Producer price data released yesterday supported the case for monetary easing, showing the prices of final goods dropped 0.3 per cent in the March quarter, well below analyst forecasts for an increase of 0.5 per cent.

Yesterday, diversified conglomerate Wesfarmers was down 13?, or 0.4 per cent, at $29.34 after analysts reported that third-quarter sales at its Coles supermarket unit could fall short of arch rival Woolworths as shelf prices continued to fall amid heavy discounting.

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Frequently Asked Questions about this Article…

Why was ASX trading volume so low on that day and what does $2.65 billion turnover mean for investors?

Analysts blamed the midweek Anzac Day holiday for weak liquidity: the S&P/ASX 200 saw just $2.65 billion of trades, the second-lowest daily turnover this year (only the first trading day had been lower at $1.8 billion). For everyday investors, low turnover usually means fewer large trades and more muted price moves, so market moves can be less reliable until normal volume returns.

How did the Anzac Day holiday affect the S&P/ASX 200 performance that session?

The holiday kept many large institutional investors on the sidelines, contributing to a cautious session. The benchmark S&P/ASX 200 closed down 14.1 points, or 0.3 percent, at 4,352.4 points, with most sectors under pressure amid low participation.

How could the upcoming consumer price index (CPI) inflation data influence the ASX and RBA interest-rate decisions?

Analysts were cautious ahead of the March-quarter CPI release because core inflation numbers can sway markets and the Reserve Bank of Australia. Forecasts in the article expected a 0.6 percent rise in underlying inflation for the quarter, putting annual inflation near 2.4 percent—inside the RBA's 2–3 percent target band. The RBA signalled it may consider cutting the 4.25 percent cash rate at its May 1 meeting if inflation is tame, so a CPI print within expectations could prompt a market rally.

What did the producer price data show and why does that matter to investors watching inflation and rates?

Producer price data released the day before showed prices of final goods fell 0.3 percent in the March quarter, well below analyst forecasts for a 0.5 percent increase. That drop supports the case for monetary easing because it suggests lower upstream price pressures, which can reduce the risk of higher retail inflation and influence RBA policy expectations.

Which sectors led gains and losses on the day and what should dividend-focused investors notice?

Materials led the falls, ending about 0.7 percent lower, industrials dropped about 0.6 percent, financials were flat, and telcos rose about 0.6 percent. The article notes pockets of strength in higher-yielding, dividend-paying sectors—particularly telcos and some financial stocks—so income-focused investors might look to those areas when volatility and low turnover occur.

How did major Australian bank shares and Telstra trade during the session?

Commonwealth Bank traded up to $50.95, ANZ rose to $23.46, Westpac increased to $22.14, while NAB slipped to $25.08. Telstra finished 2 cents higher, or about 0.6 percent, at $3.40. These movements reflect sector-specific flows even on a quiet market day.

Why did Wesfarmers shares fall and what does that mean for investors in retail and supermarkets?

Wesfarmers was down 0.4 percent to $29.34 after analysts reported that third-quarter sales at its Coles supermarket unit could fall short of rival Woolworths, as shelf prices continued to fall amid heavy discounting. For investors, this highlights competitive pressures and margin challenges in the supermarket sector.

Should everyday investors expect a market rally after the inflation numbers?

The article relays different views: Macquarie said the market could rally if the March-quarter CPI comes within expectations, while Goldman Sachs' Richard Coppleson described the current week as a likely 'write-off' but expected markets to pick up afterward. In short, a CPI print that is tame could spark a rally, but market reactions will depend on participation and subsequent policy signals from the RBA.