Australian Stock Market - CLOSING - 07/27/2011
AFTERNOON REPORT
(4.30pm AEST)
Higher than expected inflation data, coupled with the ongoing stalemate over the US debt crisis, saw local stocks lose ground today. White House officials are still confident a deal to raise the US government´s borrowing power will be agreed upon before the August 2nd deadline, however the worry now is that the US could still have its AAA credit rating downgraded.
The All Ordinaries Index (XAO) fell 33.7pts or 0.7pct to 4612.6 while the S&P/ASX 200 Index (XJO) lost 35.9pts or 0.8pct to 4537.4.
The main measure of inflation in Australia, the Consumer Price Index (CPI), rose by 0.9pct in the June quarter, above economist expectations on an increase of 0.7pct. In response to the inflation data the Aussie dollar hit a 29 ½ year high of US110.61 cents.
The annual rate of inflation rose from 3.3pct to 3.6pct. Higher prices for fruit, petrol, medical costs, furniture, financial services and rents were only partially offset by lower prices for electrical and technology goods, vegetables, milk, electricity, domestic holiday costs and toiletries. The Reserve Bank focuses on three "underlying" price measures: trimmed mean, weighted median and CPIX (CPI less fruit, vegetables, petrol and deposit and loan facilities). The trimmed mean rose by 0.9pct (2.7pct annual); the weighted median rose by 0.9pct (2.7pct) and CommSec estimates CPIX rose 0.5pct (2.4pct). The average of the Reserve Bank's preferred "underlying" measures of inflation - weighted median, trimmed mean and CPIX - rose from 2.4pct to 2.6pct in annual terms. Interestingly two other measures of "underlying" inflation printed on the low side. The "All Groups" measure excluding 'volatile' items rose by 0.5pct in the June quarter with the annual rate falling from 2.6pct to 2.5pct. While the measure of "market goods and services excluding 'volatile' items" rose 0.6pct in the June quarter with the annual rate steady at 1.8pct.
On the share market, financial and health care stocks came under the most pressure. Shares in biopharmaceutical company CSL Limited (CSL) fell 2.4pct to $31.45 while Westpac (WBC) fell 1.6pct to $21.02.
Gold miner Newcrest Mining (NCM) rallied, up 0.8pct to $40.50 as investors continued to flock to the safe haven asset of gold. The Comex gold price closed at record highs in New York overnight of US$1616.80 while continuing to rally even higher during the Asian session.
The stronger than expected inflation numbers put some pressure on retail stocks, as investors bet consumer spending would be further contained if the Reserve Bank lifts interest rates in the near term. Shares in Harvey Norman (HVN) fell 2.6pct to $2.25 while Myer Limited (MYR) lost 2.8pct to $2.43.
The Australian dollar ended the local session at US110.54c, £0.6734 and €76.21c.
On the market overall, a total of 2.1 billion shares were traded, worth $5.1 billion. 426 were up, 632 were down and 381 were unchanged.
At 4.30pm AEST on the ASX24, the futures contract was at 4512, down 30pts.
Ahead tonight; Boeing, ConocoPhillips and Visa are among the companies releasing earnings in the US. Data on durable goods orders are released, along with the Federal Reserve's Beige Book.
(From Juliette Saly, CommSec Market Analyst)