MARKET CLOSE
(4.30pm AEST)

Well after the strangest of days for the Australian market yesterday, shares locally improved strongly for the second consecutive day. The ASX 200 index (XJO) rose 2.6 pct or 106.5 pts to 4141.3 while the broader All Ordinaries index (XAO) jumped 2.7 pct or 110.7 pts to 4207.4. This takes the gains for the week to just under 1 pct so far.

The markets have been on edge in August, not just in Australia but globally also. Shares in the U.S have fallen 10 pct over the past fortnight; British stocks have slumped by 13 pct, while the Aussie market has fared better with a fall of 9 pct over the past 2 weeks.

Yesterday was the most volatile day for Australian markets in 27 years, with shares down 5.6 pct at one point, only to gain by around 1 pct on the close. Looking back in recent history it was the only day where the market was down by such a significant margin, only to turn and finish in the black.

The energy sector was the best improver today, with the S&P/ASX 200 Energy index rising 3.84 pct or 497.7 pts to 13454. Australia's second largest oil and gas producer, Woodside Petroleum (WPL) gained 4.37 pct or $1.52 to $36.33 while the smaller Santos (STO) jumped 3.93 pct or 45 cents to $11.90.

The S&P/ASX 200 Materials index jumped 3.29 pct or 388.8 pts to 12211.9. The world's largest miner, BHP Billiton (BHP) rose 3.64 pct or $1.35 to $38.40 while the second largest Australian resource company, RIO Tinto (RIO) gained 3.74 pct or $2.61 to $72.35. Despite today's impressive gains, BHP and RIO shares have fallen 13 pct over the past month.

The S&P/ASX 200 Financials index rose 2.37 pct or 88.3 pts to 3808.5. The four major banks all ended substantially higher today, with National Australia Bank (NAB) gaining 6.05 pct or $1.30 to $22.80, ANZ Banking Group (ANZ) improving by 4.16 pct or 79 cents to $19.80, Westpac (WBC) up 4.57 pct or 88 cents to $20.14 while Commonwealth Bank of Australia (CBA) ended 2.01 pct or 95 cent higher to $48.23. On average the big four banks have fallen 6.8 pct over the past month.

The retailers ended mixed today, with department store owners, Myer (MYR) and David Jones (DJS) both gaining close to 3 pct. Having said this, MYR has dropped 16 pct over the past four weeks while DJS has slumped by 30 pct.

On the earnings front in Australia, Commonwealth Bank (CBA), Domino Pizza Enterprises (DMP), Stockland (SGP) and Computershare (CPU) all posted their profit results.

Commonwealth Bank of Australia (CBA) released its full year profit results prior to market open this morning. Cash net profit for the previous financial year came in at $6.83 billion, a 12 pct increase on the prior year. Australia's largest lender announced a higher dividend payment of $1.88 per share which will be paid to shareholders on October 6.

Yesterday, National Australia Bank (NAB) posted its third quarter cash profit (April to June) of $1.4 billion. The bank indicated that operating conditions remain tough due in part to slow credit growth and weak consumer sentiment levels (which has been confirmed with today's latest economic data).

Both ANZ and WBC will be posting their results next week.

DMP was one of the better performers today after announcing a 20.3 pct rise in full year net profit to $21.4 million. Sales across all stores came in at $746.4 million and the company announced that a final fully-franked dividend of 11.5 cents per share will be paid to shareholders. The dividend is scheduled to be paid to investors on 15 September. There were 53 new Domino stores over the past 12 months, with 25 being opened in Europe and 28 in Australian and New Zealand. DMP was first listed in 2005 and has a market capitalisation of $418.6 million. The company's shares rose 7.19 pct or 41 cents to $6.11 by close of trade.

Stockland Group's (SGP) full year profit result was in line with expectations today. The property developer said that net profit was $754.4 million while Earnings Per Share (EPS) was 31.7 cents per share (cps). SGP shares fell 3.6 pct or 10 cents to $2.68.

The Civil Aviation Safety Authority (CASA) lifted the flight ban on Tiger Airways effective today. Tiger's parent company, Singapore Airlines (SIA:SP) is down 1.77 pct in Singapore trade. Tiger had been grounded in Australia since 2 July 2011. On CASA's website today, it stated that "The number of sectors Tiger Airways may fly is initially limited to a maximum of 18 a day during August 2011. Increased operations after August will be subject to CASA approval."

The government agency also said that it would be "...closely monitoring the operations of Tiger Airways through scheduled surveillance and regular spot checks. We will also be meeting regularly with the airline to review ongoing safety performance and compliance with the conditions on the airline´s operations.´´

On the economic front today, a report on consumer sentiment was released at 10.30am (AEST) this morning. A survey is put together on a monthly basis by asking more than 1,000 Australian consumers to fill out a questionnaire. Questions are asked about their opinions when it comes to employment and economic conditions. The answers are then compiled and expressed in index form.

Confidence has fallen for the past four straight months with the most significant drop coming in July. This month, the Westpac/Melbourne Institute index of consumer confidence hit a 27-month low of 89.6, recording a 3.5 pct drop during the month. Confidence levels have dropped by more than 24 pct over the past 12 months.

Commsec Economist Savanth Sebastian said that "Not only was consumers decidedly more gloomy, but it was concerning to see that some sub-components of the survey recorded disastrous falls. In fact consumer expectations of economic conditions over the next 12-months slumped by 13.5 per cent in August to be down 42 per cent lower than a year ago. Even the outlook for family finance was down almost 27 per cent in the past year to the weakest reading since the early 1990´s. The bottom line is that there has been a dramatic plunge in consumer spirits in a short space of time. Just 12 months ago consumer spirits were holding near levels that would be considered euphoric and now sentiment levels are decidedly pessimistic."

Data over the past few weeks has also been less than promising. The number of home loans issued to consumers purchasing homes is remaining subdued, the number of building approvals issued to developers by councils continues to fall and retail spending across the country is growing at its slowest pace in 50 years.

Asia-Pacific Markets

Sharemarkets in the Asia Pacific region made amends for yesterday's poor performance. Japan's Nikkei 225 rose 1.05 pct or 94.26 pts to 9038.74, Hong Kong's Hang Seng jumped 2.7 pct or 521.7 pts to 19852.4 and shares in Taiwan improved by 3.25 pct or 243.2 pts to 7736.32. South Korea's KOSPI has been one of the hardest hit over the past week and gained by a modest 0.27 pct or 4.89 pts to 1806.24 today.

The world's second largest economy, China released its latest trade balance report while Japan's central bank (the Bank of Japan) published the change in the price of goods sold by businesses (business inflation). China's trade balance came in higher than expected. This measures the difference in value between imported and exported goods over the previous month.

What to Expect from EU, US Markets

In European trade tonight, Germany will be releasing its latest Consumer Price Index (CPI), France will be publishing a report on the output produced by manufacturers, and the Bank of England will be releasing an inflation report in addition to its Governor holding a press conference.

Overnight, the U.S central bank said it would keep rates near zero for at least two years. This provided some certainty to markets, which gained more than 4 pct in U.S trade. It is rare for the bank to give such precise promises as this. The Federal Reserve's Chairman, Ben Bernanke also did not rule out the possibility of further stimulus if needed by the economy. This was one of the reasons global markets rose strongly on Tuesday night.

The Fed said that the U.S economy is growing at a significantly slower pace than in the past with deterioration in employment, household spending, investment and a lacklustre property market.
In the statement, the central bank said that "The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate. The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate." Note that this is not a surprising statement and almost an identical one has been used over the past several months.

In U.S trade tonight, the Energy Information Administration (EIA) will release its weekly figures on crude oil inventories. The U.S Treasury will publish its most recent federal budget at 4am (AEST) tomorrow morning. This measures the difference in dollar value between the government's income and expenses over the previous month.

The volume of shares traded came in at 3.07 billion today, worth $8.37 billion. 1,062 shares were up, 195 finished weaker and 234 ended unchanged. The dollar value of shares traded today once again was significantly higher than the average.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.59 pct or 24 pts to 4118.

Most major European markets trade between 5pm (AEST) and 1.30am (AEST). Futures in Europe are pointing to a stronger start to trade.
Dow Jones futures are slightly lower, indicating that U.S shares could start a little weaker when American markets open at 11.30pm (AEST).

Turning to currencies, the Australian dollar buys US103.5 cents, JPY79.4 and EUR72.01 cents. The Australian dollar fell below parity for the first time since March this year yesterday, however has recovered strongly over the past 24 hours.
One of the best performing stocks on the market today was Iluka Resources (ILU), which rose 12.45 pct or $1.78 to $16.08. ILU is involved in the exploration of mineral sands. The company was first listed on the ASX in 1962 and has a market capitalisation of $6.73 billion.

(From Steven Daghlian, Commsec Market Analyst)