THERE are signs of life and glimmers of hope in the market after a reporting season that beat expectations - albeit only slightly - and promised better things to come.
The February reporting season all but wrapped up on Friday with overall results coming in slightly ahead of analysts' expectations and outlooks from ASX-listed companies generating an anticipation that a recovery is on the way.
Deutsche Bank head of research sales Glenn Morgan said key themes to the reporting season were strong runs in yield stocks, stocks with New Zealand exposure, market proxies such as AMP and internet stocks such as REA Group.
"Profit expectations were at least met," Mr Morgan said.
"Outside resources, profits are growing rather nicely now, certainly among banks and industrials.
"They might have got there with cost-cutting and with some help from lower interest rates along the way, but they got there."
Resources stocks lost 0.5 per cent in February, while financial stocks gained 6.5 per cent over the same period.
During 2013 the Australian share market has gained 9.3 per cent, with the benchmark S&P/ASX200 index closing at 5,086.1, down 18 points, or 0.35 per cent on Friday.
Goldman Sachs reported that headline results had beaten analysts' estimates by their highest level in seven years during the reporting season, nominating Wesfarmers, BlueScope Steel, JB Hi-Fi and Commonwealth Bank among those to deliver positive surprises.
JB Hi-Fi's $82 million net profit for the six months to December 31, up three per cent on the prior corresponding period, was one of the surprises of the season, causing a one-day 17 per cent surge in its share price and raised optimism around retail stocks.
Harvey Norman enjoyed two days of share gains on Thursday and Friday despite posting a 37 per cent fall in first half profit, with chairman Gerry Harvey pointing to a lift in January sales.
Financials fared well, led by the Commonwealth Bank reporting a record first-half profit of $3.66 billion.
Resources suffered, with BHP Billiton reporting a 58 per cent fall in first half profit, driven by lower iron ore, coking coal and oil and gas prices, cost increases and a weak US dollar.
However a focus on cost management - and management changes - at BHP Billiton and rival Rio Tinto have gained analysts' approval, with the majors expected to be well placed to capitalise on a lift in commodity prices.
"If there was a disappointment, it was among the second-tier resource stocks," Mr Morgan said, citing their lesser ability to take out costs.
Deutsche Bank equities strategist Tim Baker said that for the first time in three years a majority of companies had upgraded forecasts rather than downgraded them.
While only only a thin majority, the upgrades promised earnings growth, Mr Baker said.
"If you put resources to one side, industrials and banks are already growing profits reasonably well," he said.
Low interest rates also delivered a surprise for the season in the form of higher dividends and lower net interest expenses for companies.
Mr Morgan said the overwhelming sense in the market was that "the leverage hasn't come yet".
The world feels like it's getting a little better, companies have got nice and lean and there will be a lot leverage to the upside when that top line does come," he said.
"And there was enough in the reporting season to give us faith that it still should come."
Mr Morgan noted there was still a broad pattern of investors being underweight in equities.
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