Market closes week off its highs as investors take profits

The Australian sharemarket has closed slightly higher for the week, after shedding some of its gains following stellar earnings performances by two of the big four banks.

The Australian sharemarket has closed slightly higher for the week, after shedding some of its gains following stellar earnings performances by two of the big four banks.

The S&P/ASX200 rose 0.5 per cent for the week to close at 5411.1 points. The broader All Ordinaries index closed up 0.39 per cent for the week to 5406.5.

The local sharemarket had been recording new five-year highs in October, as the Fed confirmed market expectations this week that it would continue its $US85 billion-a-month bond-buying program at the same pace as it waits for a sustained recovery in the US economy.

It lost some ground as investors took profits after shares in three of the four banks, Commonwealth Bank, ANZ and Westpac, pushed to all-time highs.

The National Australia Bank reported a $5.94 billion profit on Thursday while ANZ delivered a record cash profit of $6.49 billion in the year to September.

"You have to look at it in the context of where the market has come from over the last month," said JBWere executive director Mike Kendall of the market's modest increase for the week. "The market's moved incredibly fast and an incredibly long way. So it's going to need more fuel in the tank to keep pushing further along without it having a bit of a rest."

Apart from the banks' earnings results, the market mulled over a report suggesting that Zurich Insurance was in talks to buy Wesfarmers' insurance business. A request by the Australian Prudential Regulation Authority for banks to limit their dividend payouts to investors to meet new rules on capital buffers also fed into market sentiment.

Patersons Securities strategist Tony Farnham said Australian banks were well capitalised and there should not be too much concern about the APRA request. "Our banks are well progressed towards satisfying the Basel III requirements that have to be in place by the start of 2016," Mr Farnham said. "Even if APRA amped it up again and add another amount of extra capital required, I believe ... the banks are going to be generating enough capital internally to satisfy those requirements, particularly in an environment of low credit growth."

On Friday, the big miners continued to lose ground despite a bigger-than-expected rise in Chinese manufacturing activity, with China's Purchasing Managers Index rising by a third of a percentage point to 51.4 points in October.

BHP Billiton dropped 13¢ to $37.53, Rio Tinto lost 45¢ to $63.54 and Fortescue was 5¢ weaker at $5.16. Department store David Jones was one of the best performers among the top 200 companies, adding 18¢, or 6.6 per cent, to $2.90 after quarterly sales rose by 2.1 per cent.

Macquarie Group was another company to post strong gains, adding $2.15, or 4.2 per cent, to $53.10 after its half-year profit rose nearly 40 per cent to $501 million and its dividend was increased.

Next week Westpac will report its full-year results for 2013, with the bank forecast to record earnings of more than $7 billion. The market's attention is then expected to turn to the flood of economic data being released in Australia and the US.

In Australia, the RBA is set to meet on Tuesday, with financial markets and economists tipping the central bank to keep rates on hold at 2.5 per cent. The latest retail sales figures, jobless data and imports and exports numbers are also expected to be closely watched by the market.

In the US, all eyes will turn to the third-quarter GDP figures, October non-farm payrolls and unemployment rate numbers published on Thursday and Friday.

"The bigger picture suggests that overall, the market's going to continue to edge higher. The question is: at what pace?" Mr Kendall said. It was likely to be "bouncy" but positive over the next six to eight weeks."

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