Business as usual for the ASX

With questions still arising about the composition of the Australian Senate, the local market is returning to business as usual despite the government-elect’s law-passing dilemmas.

Bottom-up news will come in drips and drabs; yesterday saw the release of Newcrest’s FY13 financial report and after a year of downgrades, losses and asset right downs, the pay freezes across NCM’s management board were expected and the market reacted positively to the news. With the gold price holding firm NCM may continue to drift higher in news from Syria.

However, we are not expecting any major company news over the next few days; the only results to look out for will be Myer on Thursday which will get attention as a barometer of the retail space. Considering the state of the official retail sales figures over the last five months the second half of FY13 may follow on from the first half of for the financial year, and the fact that MYR has rallied 31% since the June low means the results may see a sell the fact effect on Thursday.

The dragon (China) and the crane (Japan) will again be the focus of Asian trade today. At 9:50 AEST, Japan will release the minutes from its monetary policy meeting which will outlay further aspects of how the Bank of Japan sees the current state of its monetary stimulus programme, as well as the industrial activity figures. This piece of data will be interesting to watch over the coming years with the announcement over the weekend that Tokyo will host the 2020 Olympics.

As a very proud nation, Japan’s local economy is set for a boost in spending across the public and private purses; the prospect of that additional stimulus spending alone sent the local market off to the races yesterday.

Yesterday also saw the release of a note from Japanese investment bank Nomura stating that the last five host cities on average experience a 16% rise in the country’s stock market in the preceding 18 months after the announcement. This bodes very well for the biggest lead market in the Asian region.

China will release further data today that should support the ‘stability’ call, with the release of fixed asset investment and industrial production. We will want to see asset investment holding at current levels considering how hard the central government has been cracking down on second and third asset purchases, and will want a rise in industrial production figures to support the data seen in the trade balance and export numbers.

The Chinese data over the last week has had a profound effect on the AUD. Last week was its strongest run up since December 2011, up 2.3%, and could push higher if both China and Japan register solid figures. With the local economy still sluggish and beholden to the currency’s appreciation, today’s NAB business confidence numbers will be interesting having hit a four year low last month. A weak figure here will give Prime Minister-elect Tony Abbott another headache to deal with as he looks to stimulate the local market. 

Ahead of the open, we are calling the ASX 200 up 16 points to 5198 (0.31%) as the Japanese market again looks like jumping up of the blocks to open up almost 1% to 14335 – as the USD/JPY holds firm just below parity at ¥99.62.

BHP’s ADR is suggesting the stock will add an addition 28 cents on the open to $35.92; however it will be affected late in the session on the release of the Chinese data that may affect its London listing more than the ASX listing. Iron ore held at $134.8 a tonne, however it has weakened over the last week and investors will need to weigh the effect this may have had on the material plays as the week progresses. 

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