Across the region, Asian markets are mixed following a complete lack of leads overnight and in very thin, holiday-affected trade. The Nikkei 225 is 0.8% firmer after being lower early on the back of a stronger yen, which hurt exporters. Elsewhere, the Hang Seng and Kospi are 0.2% and 0.5% firmer while the Shanghai Composite is up 1%.

In Australia, the ASX 200 closed the session 1.3% higher at 4276.1, the highs of the session. Having opened convincingly lower, the market rose steadily throughout the session with the financials, energy and industrial sectors all seeing solid gains.

After opening below 4200, it was one-way traffic as strong support emerged below the key 4200 level, as previously seen on the 21st?May. Although volumes are very light, it appears strong terms of trade numbers and an RBA statement that contained no surprises was enough to move the market higher.

With the market hitting a 7-month low this morning, perhaps we've started to see some valuation based buying emerge, even though it's on light volumes. At the end of the day, for those investors with a 3 - 5 year time horizon, the market is cheap.

Technically, there looks to be a lot of support through the 4175 - 4200 range. The big 'hammer' candlestick pattern from May 21 shows a massive rejection of lower prices. It's very encouraging to see buyers willing to step in and buy around these levels - given the short-term oversold position, we could be seeing the start of a relief rally.

In economic news, there were no surprises from the RBA as they left interest rates on hold at 4.50%. However, it appears the RBA statement may have been a little less dovish than the market was expecting, with the Aussie dollar rallying from around 0.8360 to 0.8430.

Turning our focus to the market and it was a very impressive rally from this morning's low, led by solid buying among the beaten up financials. The sector was the best performer, rising 2.1%, with Macquarie Group topping the leader board. They rose 4.4% while the big four banks were all up between 2.3% and 3%.

The industrial sector had a big rally too, finishing the session 1.9% higher as the likes of Toll Holdings, Brambles, Leighton Holdings and United Group were all up between 1.9% and 6.3%, with Toll the best.

Boral didn't trade today after announcing an overhaul of its strategic direction, with plans to invest more in its core businesses in Australia and the US. The growth will be funded by a $490 million entitlement offer at $4.10 a share, a 16% discount to the group's last traded price of $4.89. The plan will see around 120 million new shares issued, or around 20% of Boral's issued capital. Boral also announced plans to streamline its business model and cut the number of divisions to five from seven, saying it will close down a number of underperforming and obsolete plants, resulting in impairment charges of $289 million which includes a $14 million restructuring charge in FY10. Nonetheless, the group said excluding impairment charges, it is on track for a FY profit of $123.5 million - $132 million, after saying in February it was comfortable with the then consensus market forecast of $123.5 million.

The energy sector rallied to close 1.4% higher, with Whitehaven Coal the top gainer, up 5.3% on expectations it could be the next takeover target. Elsewhere, Oil Search, Woodside Petroleum and Santos were all up between 1.9% and 3.1%.

In a comment from Credit Suisse, it upgraded Woodside Petroleum to outperform from neutral in the wake of a recent pullback in the share price. The broker said Woodside has advised that the Australian government's planned taxation changes will have little impact on the North West Shelf operations. CS believes that on that basis it sees no changes to forecast earnings and a small increase in net asset value due to lower corporate tax charges from 2013-14.

In other news, Macarthur Coal was 0.7% stronger after it upgraded its FY2010 net profit guidance by approximately 10% to between $115 - $125 million. It had previously forecast net profit in the range of $103 - $113 million. The upgrade stemmed from additional tonnage being loaded onto ships earlier than expected. The big question on everyone's mind now will be whether or not this upgrade and yesterdays M&A news reignites interest from potential suitors, in particular Peabody. If Peabody thought Macarthur was worth $15 per share under the now defunct RSPT, one would think it offers more value under the new MRRT.

The materials sector also chipped in with gains of 0.4%. Fortescue topped the group, climbing 3.2% while the likes of Orica, Bluescope, Amcor and BHP Billiton were all up between 0.5% and 1.8%.

In an interesting market note from Southern Cross equities, it said risk-adjusted value is emerging for Australian equities. While macro risks remain, Southern Cross believes Australian equities represent risk-adjusted value for the first time this year. In addition, the broker thinks there are large short positions in many stocks and sectors which will act as a coiled recovery spring. More importantly, after the scrapping of the resource super profits tax, takeover activity has begun to re-emerge, which is a historic sign that corporates view equities as undervalued. Southern Cross also added that investor sentiment has turned decidedly bearish and consequently, it smells an imminent and tradable rally in cyclical risk, favouring companies like Qantas, Bluescope, Leighton and News Corp.

Ben Potter Research Analyst

IG Markets - CFD trading