Melbourne - The Australian market closed the session firmly in the black for the third consecutive session as traders and investors alike reassessed their largely underweight equities positions.
The cyclical sectors leveraged to the global recovery led the market higher. However, after three strong sessions, traders are beginning to take some profits off the table.
However, sooner or later, we're going to get some downbeat corporate news from the US. We have too, it's just a matter of when and not if. This will see the market pullback a little. It's a very strong move for only three sessions and will naturally succumb to profit taking.
The coupled rise in the VIX and S&P 500 overnight indicates this, with US traders already betting that a pullback is nigh.
The Chinese data was inline or better-than-expected, but this was largely factored into markets.
Looking toward the second half of the year, China's recovery is certainly on track. We could start to see some upward revisions to 3rd and 4th quarter GDP forecasts, possibly toward the 9% and 10% levels.
The S&P/ASX 200 was up 1.7% at 3995.6 after trading as high at 4022.30.
In economic news, China has just reported a raft of key economic data. Real GDP YoY grew at 7.9% versus analysts expectations of 7.8%. Also, YoY industrial production was better-than-expected at 10.7% versus forecasts of 9.5%. Retail sales were slightly lower-than-expected while the consumer and producer price indices fell more than anticipated.
Looking at the sectors, it was the pure cyclicals that drove gains. The materials (2.5%), consumer discretionary (2%), industrials (1.9%) and energy (1.8%) sectors were the best performers.
Among materials stocks, BlueScope Steel (7.4%), Alumina (5.9%), Fortescue Metals Group (4.4%), Rio Tinto (4.6%), Newcrest Mining (2.5%) and BHP Billiton (1.8%) were the biggest gainers. Leads from the London Metals Exchange were strong with Copper rising 4%, Zinc 3%, Aluminium 3.1% and Nickel 2.3%.
In the consumer discretionary space, Crown (3.7%), News Corporation (2.6%), Fairfax Media (2.5%) and Harvey Norman (2.4%) were the major movers.
Downer EDI (6.1%), Leighton Holding (4.3%), Qantas (3.6%) and Macquarie Infrastructure Group (1.8%) added the most points to the industrials sector.
Macquarie Infrastructure Group this morning cut their portfolio valuation to $5.1 billion and a net asset backing of $2.54 per security versus $3.30 in December. Macquarie Infrastructure Group said "the ongoing dislocation in global economic and market conditions continue to have a negative impact on the valuation of its toll road portfolio". The cut in valuations was largely expected by the market, hence the price stability.
In the energy sector, Caltex (6.6%), Paladin Energy (3.9%), Santos (2.6%) and Woodside Petroleum (1.3%) were the major contributors. In the energy market overnight, Crude Oil futures snapped a three-day losing streak as increased demand from refineries triggered an unexpected drop in available stockpiles. Currently, crude oil futures for August delivery are trading at $61.50.
Caltex received an upgrade from Morgan Stanley this morning to 'equalweight' from 'underweight'. They also raised their price target from $8 to $12. "We still believe Caltex is heading into a challenging macro environment, and expect flat performance. However, resilience to date suggests the lows may not be as deep as first anticipated".
