Daily Market Summary

Market News –Tuesday, 2 February 2010

Important Note: This commentary is a general account of the day's trading and is not intended to be, nor should it be, taken as a recommendation to buy, hold or sell any particular stock.

Market Update:

The Australian market was positive for a few moments in morning trade, but the S&P/ASX 200 fell this afternoon to finish 46 points down to 4524.

Trading was busy with turnover of $5.3 billion, comprising 246 rises, 970 falls and 265 steadies.

China’s manufacturing expansion throughout January caused Australian market participants to fear further contractionary measures from the Chinese government. Also dampening sentiment was the ANZ Bank's monthly survey of job advertisements which showed the total number of jobs advertised in major metropolitan newspapers and on the internet fell by 8.1 per cent in January.

The best performing sector in the Australian Market was Consumer Discretion (+0.51%), led by NWS(1.27%) and TAH (+0.14%). Information Technology

(+0.39%) was the only other sector to finish in positive territory. In contrast, the worst performing sector in the Australian Market was Energy (-2.55%). Other sectors which detracted from the relative performance of the index were Property (-1.70%), Materials (-1.32%) and Utilities (-1.05%)

Aristocrat Leisure hit "three pyramids" by releasing a profit upgrade. The stock finished up 11% to $4.41.

One Australian Dollar can be exchanged for 0.883 US Dollars, 79.675 Japanese Yen and 0.636 Euros.

Tomorrow the RBA will meet and an interest rate rise is almost certain due to high CPI figures released last Friday.

Overnight:

Stocks rebounded from three-month lows on upbeat manufacturing reports in the US, Europe and China.

Apple rose on Monday to lead the Nasdaq higher. Advanced Micro Devices and Intel Corp were almost among notable gainers.

Citigroup rallied 0.6% on speculation the bank plans to sell or split its US$10B Citi Private Equity unit.

Casinos advanced. Macau's casino revenue climbed almost 65% in January from the same month in 2009, according to data from the casino operators. Las Vegas Sands Corp. Wynne Resorts, Melco Crown Entertainment and MGM Mirage added between 5% and 9%.

Data on the manufacturing sector and earnings from Exxon Mobil further improved sentiment. Exxon gained around 3% as profit fell less than estimated because of higher oil prices and output.

Almost 80% of quarter-earnings results released since 11 January in the S&P 500 have beaten analysts' estimates. However, the earnings results have mostly been driven by cost-cutting and easy comparisons to an abysmal fourth quarter of 2008.

President Obama unveiled a US$3.8T budget for 2011 on Monday that looks to both support the still-fragile economy and temper the nation's growing deficit. Specifically, he outlined a plan to reduce the nation's debt by $1.2T over the next 10 years and to get annual deficits down from 10.6% of GDP to 3% by 2015.

Data showed that the manufacturing sector in the United States grew in January at a faster rate than expected. The report followed strong data from China, Australia and the euro zone. US manufacturing expanded the most since August 2004, according to the Institute for Supply Management. The Institute for Supply Management's factory index rose to 58.4, exceeding economists' forecasts. A reading above 50 indicates expansion.

In other economic news, personal spending rose 0.2% in December. Economists expected it would rise 0.3%. A separate report showed construction spending fell 1.2% in December, which was worse than expected.

European shares closed higher on Monday on strong manufacturing data and firmer commodity prices.

National benchmark indexes climbed in all 18 western European markets, except Greece. France's CAC 40, Germany's DAX and the UK's FTSE gained around 1%.

Banks were among the biggest gainers. The Royal Bank of Scotland, Barclays, Credit Agricole, Commerzbank, Deutsche Bank and HSBC were up between 1% and 8%.

Miners were also among the top performers as metals prices rebounded from earlier lows. Anglo American, BHP, Eurasian Natural Resources, Kazakhmys and Xstrata rose between 2% and 5%.

China's manufacturing industry expanded at a near-record pace, according to a report by the Federation of Logistics and Purchasing. A separate report showed that the euro zone manufacturing sector grew at its fastest pace in two years in January, but the divergence between laggard Spain and the rest of the big four economies widened. Britain's manufacturing activity grew at its fastest rate in 15 years.

Among individual movers, Irish airline Ryanair rose 6.7% after the company increased its profit forecast for the year after a narrower-than-expected third-quarter loss.

Northumbrian Water group surged 12%, the biggest jump in six years, following media reports that the Ontario Teachers' Pension Plan may bid for the company.

Vivendi fell 2.4% after the French media telecommunications group was found guilty on Friday of misleading investors by a US jury.

Source: Aegis Equities Holdings Pty Limited; ThreeSixty Direct Equities Research, NAB Capital.