The Australian sharemarket displayed some spark of life on Tuesday, closing up and near the session's highs as it attempts to break out of a recent funk.
The S&P/ASX 200 index added 18 points, or 0.3 per cent, to finish at 5964, while the All Ordinaries Index gained 16 points to 6044.
The local bourse took inspiration from an upbeat night on global markets, after investors largely shrugged off growing political instability in Germany, while the widely anticipated resignation of US Federal Reserve chair Janet Yellen also failed to make waves.
German chancellor Angela Merkel on Monday night expressed a preference for fresh elections over a minority government after negotiations to form government with coalition partners fell through. Despite this, the euro remains only 0.4 per cent lower this week.
UBS European economists were not surprised by the "contained" market reaction. "Policy continuity is unlikely to be interrupted in any of the possible outcomes," they wrote.
The market's "insouciance" - as one strategist put it - to the political developments in Europe helped support a solid day of trading on the ASX and across the region on Tuesday. Most of the ASX 200 stocks ended the session higher, led by the heavyweight miners. Banks were mixed, although Macquarie Group was particularly well supported, climbing xx per cent to within striking distance of $100 per share.
With buying in the bluechips mostly contained, smaller ASX names grabbed investors' collective attention.
Infant formula firm A2 Milk impressed investors with a trading update that showed net profits had more than doubled over the first four months of the year. The stock added 5.5 per cent after boss Geoffrey Babidge said the New Zealand-based firm was considering paying dividends.
Less impressed were GrainCorp shareholders, who sent the stock down 4.9 per cent after the grains handler reported a four-fold increase in annual profits, but flagged a more downbeat earnings outlook.
Investors in ALS were even less forgiving as they reacted to the laboratory testing firm's half-year earnings result on Monday evening, which also included a profit downgrade. The stock fell 7.4 per cent on Tuesday.
The release of the minutes from the Reserve Bank of Australia's most recent monetary policy meeting revealed the central bank's growing uncertainty around the outlook for wages. The news confirmed the RBA's bias towards holding rates at their historic low of 1.5 per cent, economists say. The news chipped away at the Australian dollar, which slipped around a quarter of a US cent to 75.4??.
Market Movers
Stock Watch: Carsales.com
Carsales shares are up 22.9 per cent this year climbing to $14.02 following the acquisition of Encar.com. The company announced its expansion of the former joint venture on Monday, taking over the remaining 50.1 per cent of the South Korean online company for $244 million, funded by debt. According to the release, Carsales says that gaining full control over Encar.com will lead to more strategic freedom like a pay-per-lead model. Broker Deutsche Bank's price target sits at $13.50 per share with a recommendation to hold. The South Korean market is 25 per cent larger than the Australian market and Carsales believes the acquisition is of reasonable value and has potential to improve the core business.
Gold
Gold prices bumped higher on Tuesday after falling more than 1 per cent in the previous session, with North Korean geopolitical woes burnishing the metal's safe-haven appeal. Spot gold was up 0.3 per cent at $US1280 per ounce in late afternoon trade. Bullion fell about 1.4 per cent on Monday in its biggest one-day percentage drop since September 11. US President Donald Trump put North Korea back on a list of state sponsors of terrorism on Monday, a designation that allows the United States to impose more sanctions and risks inflaming tensions over Pyongyang's nuclear weapons and missile programmes.
Steel demand
Chinese rebar steel futures climbed 2 per cent on Tuesday, gaining for a second straight day on expectations that demand in the world's top consumer would bounce back sharply when production curbs are lifted after winter. Chinese steel mills, mainly across the country's north, have been ordered to curb output during winter as part of Beijing's campaign to limit air pollution. The curbs apply from this month through March. The posited lift in demand gave the Chinese iron ore futures price cause to bump up 1.3 per cent on Tuesday afternoon, after the spot price climbed 1.4 per cent on Monday evening to $US63.47 a tonne.
Fairfax shorts
Shorts in Fairfax Media, publisher of The Australian Financial Review, have tripled in the last week, following the spin-out of online property classified business Domain Holdings. The publisher maintains a 60 per cent stake in Domain, which is now listed on the ASX. The stock closed Tuesday at 67??, down 2.2 per cent. Hedge funds have increased the number of shares short to 5.4 million. That brings the percentage of shares sold short to 0.23 per cent from 0.07 per cent. Syrah Resources, Independence Group, Domino's Pizza, JB Hi-Fi and Healthscope are the most shorted on the ASX.
GUD
Shares in GUD Holdings finished 1.8 per cent higher at $1.94. After selling its Oates cleaning products business for $80 million a couple of weeks ago, GUD Holdings yesterday announced it would AA Gaskets from West Australian company Coventry Group. Apparently non-plussed at the time, investors have warmed to the $22 million transaction. Citi analysts are believers in GUD's strategic repositioning away from "non-core" businesses such as Oates, Sunbeam and Dexion, and investing the proceeds into the automotive division. The broker notes that GUD has only spent around a quarter of its money from the Oates sale, bit replaced just shy of 50 per cent of its EBIT.
