Static retail trade figures eat into early gains

THE sharemarket closed largely unchanged yesterday after a day of tepid trading as investors gear up for the start of the US earnings season.

By InvestSMART · 10 Jan 2012

By InvestSMART ·
10 Jan 2012

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THE sharemarket closed largely unchanged yesterday after a day of tepid trading as investors gear up for the start of the US earnings season.

The market pared back early gains after data showed retail trade was a seasonally adjusted $20.933 billion in November, largely unchanged from the previous month and below forecasts of a 0.4 per cent rise.

Consumer discretionary stocks lost ground, followed by sectors deemed as riskier bets, such as energy and industrial stocks.

City Index analyst Peter Esho said the retail numbers were no surprise and some high street retailers might see "more revisions needed on the downside" in the near term.

Still, he added that with the sharp downturn in retail stocks in recent months, well-placed retailers could outperform in the coming earnings season.

Super Retail Group ended the day 2.2 per cent higher at $5.58 after it bucked the trend to report a 35 per cent rise in sales in the second half of 2011 to $758.6 million.

"We think even bad earnings numbers out in February and March might see cyclical retailers post gains in their share prices," Mr Esho said.

At the close, the benchmark S&P/ASX200 index was down 3.1 points at 4105.4, while the broader All Ordinaries was down 3 points at 4161.5. Dealers remained wary of putting money on the table ahead of the start of the US earnings season overnight.

Positive data from the US, including non-farm payrolls on Friday, have spurred gains this year as hopes have grown for the health of the world's largest economy.

But Bell Direct analyst Julia Lee said another meeting of European leaders later in the day has put the debt crisis at the front of dealers' minds. "We're seeing more risk aversion coming through as the focus turns back to Europe after good data from the US last week," she said.

BHP Billiton dipped 0.1 per cent lower to $35.20 and Rio Tinto shed 0.6 per cent to $62.15.

Spotless Group added 1.7 per cent to $2.37 after the industrial services firm said it would not accept an offer of less than $2.80 a share from its private equity suitor, Pacific Equity Partners.

PaperlinX shares ended 7.5 per cent lower as a battle between hybrid and equity shareholders threatened to scupper a takeover bid for the paper manufacturer.

The spot price of gold was $US1611 an ounce, down $US14.15.

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Frequently Asked Questions about this Article…

How did the latest retail trade figures affect the ASX market today?

The market pared back early gains after retail trade was reported at a seasonally adjusted $20.933 billion in November — largely unchanged month‑on‑month and below forecasts of a 0.4% rise. The S&P/ASX 200 closed down 3.1 points at 4105.4 and the All Ordinaries was down 3 points at 4161.5, with dealers cautious ahead of the US earnings season.

What did the retail trade data mean for consumer discretionary and riskier sectors?

The retail trade result hit consumer discretionary stocks hardest, which lost ground during the session. Other sectors regarded as riskier, including energy and industrial stocks, also eased as investors reacted to the weaker‑than‑expected retail numbers.

Could any retailers still outperform despite weak retail trade figures?

Yes. City Index analyst Peter Esho noted the retail numbers were not a surprise and warned some high‑street retailers may need further downside revisions. However, he also said that after a sharp downturn in retail stocks in recent months, well‑placed or cyclical retailers could outperform in the coming earnings season — even if earnings are weak in February and March.

Why were investors cautious about trading ahead of the US earnings season?

Dealers remained wary of committing capital ahead of the start of the US earnings season overnight. Although positive US data this year — including non‑farm payrolls — has supported markets, many investors preferred to wait for corporate results before taking larger positions.

How did Super Retail Group perform and what drove its share movement?

Super Retail Group bucked the wider retail trend, finishing 2.2% higher at $5.58 after reporting a 35% rise in sales in the second half of 2011 to $758.6 million. Strong H2 sales helped its shares outperform on the day.

What takeover and corporate developments affected Spotless Group and PaperlinX shares?

Spotless Group rose 1.7% to $2.37 after saying it would not accept an offer of less than $2.80 a share from private equity suitor Pacific Equity Partners. By contrast, PaperlinX shares fell 7.5% as a dispute between hybrid and equity shareholders threatened to scupper a takeover bid for the paper manufacturer.

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

BHP Billiton dipped 0.1% to $35.20 and Rio Tinto shed 0.6% to $62.15 during the trading day, reflecting a modest pullback in major resources names amid the broader cautious market tone.

What was the gold spot price and did it move in today's trading update?

The spot price of gold was US$1,611 an ounce, down US$14.15 on the session, according to the report.