Trading Markets Weekly Commentary: February 20

Trading Markets Weekly Commentary: February 20|Investing NewsAussie shares had a difficult week last week, as a raft of disappointing earnings results drove the market lower.

The ASX 200 dropped 48 points (-1.1%), to close the week at 4197.

Four out of twelve sectors finished in positive territory; however the two largest sectors, materials and financials, were the hardest hit.

Three of the big four banks reported during the week.

CBA fell 0.4%, after it reported a 1Q FY12 cash profit of $3.58 billion, a 7% rise compared to the year earlier. The result was slightly ahead of analyst expectations.

ANZ put on 0.6%, following a 4.8% rise in quarterly cash profit to $1.48 billion. The result was also ahead of analyst expectations.

Rival Westpac dropped 3.4% after its 1Q FY12 cash profit was 1.5 billion, a 3.3% fall from the prior corresponding period.  That result missed analyst expectations.

The major miners were the biggest drag on the market last week as a majority of commodities fell sharply.

BHP and Rio Tinto lost 3% and 4.9% respectively. Iron ore rival Fortescue defied the trend, gaining 1% amid takeover rumours.

The energy sector was weaker during the week despite stronger oil prices. Woodside dropped 1.3% while rival Santos let go of 2.4% as it revealed its FY11 underlying net profit missed expectations.

The major retailers were mixed; David Jones (-1.6%) and JB Hi-fi (-6.3%) lost ground, while Myer (+2.5%) climbed higher.

Billabong soared 41.6% following an offer from TPG of $3.00 a share, a 68% premium to the close before the offer.

Supermarket giant Woolworths defied the weaker market by putting on 1.7%.

Economic News: What Does it Mean?

There was a plethora of economic data released last week. The key ones were consumer sentiment, business confidence, home loan approvals and Jobs data.

Consumer sentiment rose 4.2% in January, after a 2.4 % rise in December. The RBA’s two rate cuts late last year were acknowledged as having an impact on the positive number, although the index is still 5.2% below where it was a year ago.

Business confidence was higher in the month of January according to the NAB Business Confidence Survey.

According to the survey, the Business Confidence Index rose to +4 in the month, after a +3 reading in December. This is still below the long-run average of +6.

The business conditions index increased to +2, after a flat reading the previous month.

The ABS revealed that home loans approved in December rose 2.3% compared to market expectations of a 1.8% gain.

The increase in home loan approvals makes it six months in a row that there has been an increase, likely spurred by diminished prospects of an RBA rate hike.

Employment data revealed the jobless rate fell to 5.1% in January. Economists were expecting the rate to rise to 5.3%.

The total number of people employed jumped by 46,300 in December, which was way higher than economist expectations of a 10,500 net gain.

The result was driven by an increase in part-time employment of 34,000 people, and an increase in full-time employment of 12,300 people.

The result also decreases the likelihood of a rate cut in March by the RBA.

In the coming week the major news will be February’s RBA minutes meeting, which is slated for release on Tuesday 11:30 am, AEDT.

Overseas Market and Commodity Wrap:

International markets finished in positive territory, as hopes mount that eurozone finance ministers will allow Greece to receive the 130 billion euro bailout package it needs to avoid a default.

European stock rallied despite early week jitters that were sparked by Moody’s downgrading the credit rating of six European nations and placing the outlook of another three on negative watch

Among the key European indices, the UK FTSE (+0.9%), the German DAX (+2.3%) and the French CAC (+2%) all gained ground.

In the US, data showed that weekly jobless claims fell 13,000 to a seasonally adjusted 348,000, its lowest level in almost four years.

The major US markets were all stronger, the Dow (+1.2%), Nasdaq (+1.7%) and S&P 500 (+1.4%) climbed higher on the week.

The larger Asian markets surged higher, with Nikkei (+4.9%) and Hang Seng (+3.4%) both extending the previous week’s rally.

Most commodities price dropped sharply; zinc (-6.4%) and nickel (-5.2%) were among the worst performers.

Gold advanced 0.5% while oil strengthened 3.8% on the back of Middle East supply concerns.

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