Australian shares enjoyed a modest bounce on Tuesday as investors moved back into the big banks and miners as fears around the impact of a potential US interest rate hike eased.
Gains in the miners as well as in three of the big four banks provided the bulk of the heavy lifting on the S&P/ASX 200, which ended the session up 9 points, or 0.2 per cent, at 5478.3. Westpac Banking Group was the exception, falling 0.6 per cent as a large investor appeared to rotate their portfolio out of the bank and into rival CBA.
While higher US rates have no fundamental impact on our lenders, the threat of a lower Australian dollar tends to spark selling by offshore investors as the big four banks are "the most liquid proxy for the Australian market" and a falling Aussie weighs on foreign returns, Watermark Fund Management analyst Omkar Joshi said.
Our currency fetched US75.63¢ in late Tuesday trade after recovering a portion of its fall of US1.5¢ in the wake of the weekend's central banker meeting at Jackson Hole.
CSL and BHP Billiton were the biggest mover among blue chips, the latter adding 0.9 per cent after the release of a report into the Samarco dam disaster in Brazil.
The penultimate day of reporting season generated some dramatic share price moves, with Surfstitch's stock suffering a 54 per cent drubbing to 12.5 cents apiece after unveiling a larger than expected full-year loss. Slater & Gordon shares plunged 15 per cent to 48 cents after reporting an annual loss of more than $1 billion.
In contrast, investors welcomed a strong profit result from private hospitals operator Ramsay Health Care.
Celeste Funds Management chief investment officer Frank Villante said this reporting season extended a multi-year story of subdued growth and cost cutting.
"Companies are still telling me it's very challenging to find revenue growth," Mr Villante said. "They are telling me that they are still looking at ways to lower their cost bases, but eventually that becomes challenging."
"It's what I've been hearing for the past three or four years," he said, adding that investors will now be "dialling down their earnings expectations" for the coming two financial years.
Mr Villante said highlights from this profit season include the IVF services providers, Monash IVF and Virtus Health, bathroom and plumbing products firm Reece, and panel beating business AMA Group.
One novelty to come out of the past four weeks was the suggestion that earnings in the battered mining services sector "may have based", Mr Villante said. "MACA was a pretty solid result."
Market Movers
Woolies woes
Woolies shares slid 2.4 per cent to $24.13 - taking them back to where they were before a surprise rally following last week's disappointing annual result. But there were signs of life in the supermarkets business and shareholders applauded the $1.5 billion fire sale of Masters. However, Masters JV partner Lowe's has thrown a spanner into hopes for a swift exit, by taking the retail giant to court, in what investors described as a "fishing expedition".
Building approvals
A surprise jump in high-rise apartment approvals drove building approvals to their biggest increase in two and a half year. The 11.3 per cent surge in approvals eclipsed the 1.1 per cent rise economists were expecting and followed two months of contraction, while dispelling fears of a slowdown in construction. But the numbers couldn't budge the Australian dollar, which was steady at US75.70c.
Wheat wilts
US wheat futures hovered at 10-year lows, as ample global stocks and a regulatory clamp-down from Egypt, the world's largest buyer of the grain, dragged on prices. Wheat slid after Egypt reinstated a controversial ban on wheat shipments containing even the slightest amount of a common grain fungus, ergot. The move baffled traders who had returned to the Egyptian market just last month when the ban was lifted.
Ramsay's record
Shares in Australia's largest private hospital operator jumped 7.8 per cent to a record high of $81.42 after the company posted a 17 per cent increase in full-year profit and boosted its final dividend by nearly 20 per cent. Strong revenue growth was driven by the opening of more than 500 beds and 26 operating theatres around the world.
Stock Watch: Still fizz in Coke
Coca-Cola Amatil shares jumped to their highest in nearly 15 months after Deutsche Bank upgraded the stock to 'buy' from 'hold and raised the target price to $10. The shares soared as much as 3.1 per cent to just below that level at $9.99 and closed up 2.1 per cent at $9.89, posting a second day of strong gains.
The brokerage likes the combination of continued earnings growth, strong cash generation and improved return on invested capital.
The stock slid more than 4 per cent on Friday following first-half earnings that showed the company is going backwards in Australia, where strong water sales only partly offset weak soft drink demand, while making inroads in Indonesia and New Zealand.
