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ASX ends muted session higher on healthcare

Updated

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Australian shares closed higher on Tuesday on a muted day of trading as healthcare stocks rebounded from a poor start to the week's trading.

Shares on Wall Street rallied late during Monday's trade after being hit earlier by uncertainty surrounding the future of a Brexit deal, as UK Prime Minister Theresa May postponed a crucial vote, citing a lack of support.

The Australian sharemarket rose close to 40 points at the open, softening its gains through the middle of the day before lifting during the afternoon. The S&P/ASX 200 Index closed 23.4 points, or 0.4 per cent, higher at 5575.9.

Healthcare stocks were among the best performers on Tuesday, rebounding from a poor session on Monday.  Nicolas Walker

"I think it reflects the turnaround in the second half of trading last night. It's a small relief rally," said Clime Investment Management large companies portfolio manager David Walker. "There aren't very many strong movements on the ASX 50. Markets are fearful and markets are cautious."

Healthcare stocks traded higher on Tuesday, rebounding from a poor session on Monday. CSL led the market gains, rising 2.1 per cent to $180.38, ResMed advanced 3.7 per cent to $15.60 and Cochlear lifted 2.9 per cent to $170.48.

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TPG Telecom was among the best performers on the market on Tuesday, a day after the telco announced it had purchased multi lots of 5G spectrum nationally for $263.3 million, as part of a joint venture with Vodafone Australia. The ACCC is also due to deliver its verdict on the company's merger with Vodafone on Thursday. TPG's shares rose 5.7 per cent to $7.78.

IOOF Holding rebounded slightly on Tuesday after having more than 40 per cent of its value wiped in the past week. It closed 1.4 per cent higher at $4.34.

QBE shares fell 4.1 per cent to $9.96 after the company announced profit for the 2019 calendar year would be between $50 million and $100 million lower than the market expected. The company also announced a costing-cutting program set to remove $US130 million ($180 million) of expenses between 2019 and 2021.

The two major supermarkets edged slightly lower on Tuesday and were among the biggest weights on the index. Woolworths closed 1.2 per cent lower at $28.40 and Coles Group fell 0.6 per cent to $12.41.

Markets across the region were also mute during Tuesday's trade. Japan's Nikkei 225 Index fell 0.4 per cent, the Shanghai Composite Index edged 0.2 per cent higher, Hong Kong's Hang Seng was up just 0.1 per cent and Korea's Kospi traded 0.1 per cent higher.

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Stock watch

Platinum Asset Management

Morgan Stanley said it is "very likely" the share price of Platinum Asset Management will fall relative to the MSCI Australia Index over the next 60 days. Analyst Andrei Stadnik estimated Platinum saw approximately $30 million of net outflows in November, the first monthly outflows since June 2017. He wrote that, "The November outflows could relate to the slowing investment performance and recent market volatility, both of which tend to impact retail flows." Eighty per cent of Platinum's business is retail, according to Morgan Stanley and it thinks there is a risk outflows will continue to deteriorate. Morgan Stanley have set their price target to $6.00 and the stock was given an 'equal-weight' rating. Platinum Asset Management's shares closed flat at $4.90 on Tuesday.

What moved the market

EM Weakness

Emerging markets are likely to continue weakening through 2019, according to Capital Economics who are forecasting a fall in earnings driven by a reduction in exports in the larger emerging markets. "Despite the fact that it has already fallen a long way, we think that the MSCI Emerging Markets (EM) Index will drop by another 10-15 per cent by the end of next year," market economist Oliver Jones said in a note. "This is partly because we expect earnings growth to slow markedly in 2019." He pointed to the strong correlation between earnings and exports in emerging markets, forecasting that as exports fell, earnings would follow.

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Aluminium

The price of aluminium dipped slightly on Monday, falling 1.1 per cent to $US1,929 a tonne on the London Metal Exchange. China's aluminium exports rose sharply during November to levels not seen since December 2014, reflecting Chinese producers taking advantage of higher prices.There has also been an increased demand for Chinese aluminium this year on the back of US sanctions against Russian producer RUSAL. CBA mining and energy commodities analyst Vivek Dhar said in a note on Tuesday the market didn't appear to be pricing in a continuation of the sanctions after the company made key changes to its governance.

British pound

The British pound crashed to a 20-month low on Monday after UK Prime Minister Theresa May postponed a highly-anticipated vote on the proposed deal for the UK's exit from the European Union. She also declined to say when a new vote would take place with a January 21 legislative deadline approaching. May said the planned vote would have been defeated by a significant margin. She will have a few days to convince European leaders to provide reassurance to UK MPs, who believe Britain could be trapped inside the European Union indefinitely under the current deal.

Business conditions

Australian business conditions fell through November, extending its losss from the previous month and taking conditions to their lowest level since November 2016. Profitability fell further during the month however capacity utilisation edged higher, a move which could be positive for the labour market. "Australian business conditions fell again in November, with weakness widespread across industries and regions," said ANZ senior economist Daniel Gradwell. "We take some comfort from the fact that conditions remain well above their long run average, but ongoing declines of this scale would become a concern."

William McInnes covers markets from Sydney including editing the Markets Live blog. Connect with William on Twitter. Email William at w.mcinnes@afr.com.au

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