Strong unofficial housing sector and consumer confidence data helped the Australian sharemarket finish ahead on Tuesday, despite some heavy losses in QBE Insurance and ALS Ltd as company reporting season continued with more disappointing news.
The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each added 0.2 per cent, on Tuesday to 5588.4 points and 5580.6 points respectively. Gains in the big four banks, Telstra, and the biggest supermarkets led the index.
QBE Insurance Group was the heaviest weight on the local bourse, as it dropped 11.1 per cent to its lowest value in more than six months at $10.57 after warning current half-year results will take a hit from the need to set aside an extra $170 million for claims from its Latin American business.
Argo Investments senior investment officer Chris Hall said that while he was disappointed to see QBE surprise the market with another downgrade he is hopeful the worst is now over leaving the stock poised to re-rate against an improving macro-economic backdrop.
“As long as there are no more operational blow-outs, rising US interest rates should help drive earnings growth and help the stock recover over the next couple of years,” he said.
A National Australia Bank survey showed business confidence among the ASX300 fell from 11 to 3 points in the June quarter.
Telstra Corporation gained 0.6 per cent to $5.46, while the biggest mortgage lenders moved higher as Housing Industry Association data showed new dwelling sales rose 2 per cent in the June quarter.
Commonwealth Bank of Australia added 0.4 per cent to $82.35, while Westpac Banking Corporation lifted 0.3 per cent to $34.27. ANZ Banking Group gained 0.5 per cent to $33.69, and National Australia Bank climbed 1.2 per cent to $35.11.
“Globally, financial services is the sector with the most upside," Cory Martin, a portfolio manager at Barrow, Hanley, Mewhinney, & Strauss said.
But, despite their quality and attractive dividend yields, Australia’s big four bank stocks have been ruled too expensive for inclusion in the portfolio.
Food and liquor was the best-performing sector, up 0.9 per cent as a weekly gauge of shopper confidence indicated the shock of the Federal budget has passed.The ANZ-Roy Morgan consumer confidence survey lifted 2.4 per cent, back to its long run average of 2.7 per cent. Woolworths lifted 1 per cent to $36.22, while Wesfarmers, owner of Coles, gained 0.8 per cent to $43.55.
Resources giant BHP Billiton eased 0.1 per cent to $39.06 as analysts mulled its plans for the Olympic Dam project. Main rival Rio Tinto added 0.6 per cent to $65.75 as the spot price for iron ore, delivered in China, rose 0.8 to $US94.30 a tonne.
Laboratory testing services provider ALS Ltd dropped 6.5 per cent to $7.50 having shown a 27 per cent fall in sample flows from the resources sector over the June quarter. Management flagged the bottom of the cycle, but Moelis & Co. analyst Todd Guyot downgraded his earnings expectations on the company.
