Australian Stock Market Report – Afternoon 10/10/2012

MARKET CLOSE
(4.30pm AEST)

After hitting a 14-month high yesterday, the Australian market ended in the red for the second time this week. The All Ordinaries Index (XAO) eased by 0.3 per cent or 14.7 pts to 4511.9. Keep in mind that both the volume and dollar value of shares exchanging hands remains light.

Global markets came under some selling pressure overnight, partly being impacted by the growth forecasts issued by the International Monetary Fund (IMF) yesterday. U.S markets also remained jittery ahead of the quarterly earnings season which kicked off this morning with aluminium producer, Alcoa. It posted a third quarter loss of $143 million due in part to high legal costs. This was still a slight better than forecast result.

Ten of 12 market sectors ended in the red today; however the defensive healthcare stocks and the energy sector finished higher. The price of oil rose by 3.5 per cent overnight, being pushed higher due to tension between Syria and Turkey in addition to uncertainty surrounding Israel and Iran. Woodside Petroleum (WPL) rose by 1.55 per cent or 52 cents to $34.10.

Commodity prices eased overnight, however the price of iron ore jumped by 5.8 per cent, adding to the 5.5 per cent jump on Monday. Despite this, iron ore miner Fortescue Metals (FMG) slumped by 2.78 per cent or 11 cents to $3.84 and was unable to back up yesterday's 6.5 per cent improvement.

Toll road company, Transurban (TCL) announced a 1.3 per cent rise in toll revenue to $195.1 million between July and September this year. TCL owns Melbourne's Citylink toll road, the M2 and Sydney's Lane Cove tunnel. Its shares still fell close to 1.5 per cent.

The major banks all finished in the red today, with Westpac (WBC) the worst of the big players after easing by 0.66 per cent or 17 cents to $25.72.

On the economic front, the latest monthly consumer sentiment survey results were issued at 10.30am (AEDT). The numbers showed that Australians are around 1 per cent more confident with the state of their finances and the broader economy in October than last month. Consumers are 2 per cent more upbeat now than a year ago. Confidence has been partly impacted by the surprise rate cut this month and expectations of another cut in November. The Reserve Bank of Australia (RBA) has made 21 rate moves over the past five years and has only made one move in isolation on three occasions.

CommSec Economist, Savanth Sebastian said that "Consumer confidence certainly isn't going gangbusters, but it is on a more positive course. Top-line consumer sentiment recorded its second consecutive rise but the gain of just one per cent in October could be categorised as disappointing - particularly in the context that the latest survey was done predominately after the surprise rate cut last Tuesday. In fact given the extent of the fiscal and monetary stimulus over the past couple of months you could argue that sentiment levels should be far higher, but the average Aussie is still not convinced that the outlook is all that rosy. And the Reserve Bank would have to be questioning the immediate impact of interest rate cuts. In fact in recent reports we have discussed the more muted impact of rate cuts particularly given that almost two-thirds of Australians do not hold a mortgage. In addition the value of term deposits have outpaced loans in recent times and the cuts to interest rates effectively result in less interest income for the savers in the economy - adding to the patchy economic recovery."

Tomorrow, the all-important monthly jobs report will be issued. The market is expecting modest job creation of around 6,000. The unemployment rate is likely to hover between 5.1 per cent and 5.2 per cent. Recently the participation rate (the size of the workforce) has been shrinking, which has artificially created the perception of a stronger jobs market (due to this pushing down the unemployment rate).

Across the region, no major data was issued; however one of the world's biggest carmakers, Toyota is reportedly set to recall 7.4 million vehicles from across the globe. This is due to malfunctioning power windows. Almost 2.5 million vehicles will be recalled in the U.S alone, which is the nation with the largest number of cars. The models which are flagged to be recalled are the Corolla, Yaris and Vitz. Most sharemarkets ended in the red today, with stocks in Japan down 1.98 per cent, 1.56 per cent lower in South Korea and 0.1 per cent weaker in Hong Kong.

In Europe tonight, both French and Italian industrial production reports are scheduled for release. Subdued readings are expected from both nations.

In the U.S, the highlight will be the Federal Reserve's Beige Book. This is essentially a summary of conditions across the Fed's 12 districts in North America. This will be released at 5am (AEDT) and is issued about eight times each year. The report includes anecdotal evidence which is supplied by each of the Federal Reserve banks; is compiled and then distributed as one document. For those interested, the document is publically available on the central bank's website at www.federalreserve.gov. A 10-year bond auction will also be held in the U.S.

Volume of shares traded came in at 1.61 billion today, worth just $3.81 billion. 400 shares were up, 548 were weaker and 354 ended unchanged.

At 4.30pm (AEDT) on the Sydney Futures Exchange, the ASX24 futures contract is unchanged at 4484.

Due to daylight savings, most major European markets are now trading between 6pm (AEDT) and 2.30am (AEDT). Futures are currently pointing to a weaker start to trade tonight.

U.S futures are pointing to a lower start tonight also. Due to daylight savings taking place in the second week of March in North America and the end of daylight savings in Australia, U.S markets will now be trading between 12.30am (AEDT) and 7am (AEDT).

Turning to currencies, the Australian dollar (AUD) remains largely unchanged against the greenback over the past 24 hours. The AUD now buys US102.2 cents. Our currency is trading at £63.9 pence and €79.4 cents.

Australia is a commodity based economy, with commodities in general accounting for almost 80 pct of all our exports over the past nine months. In essence, when the going gets tough globally, there is fear of less demand for our commodities, which tends to result in a weaker AUD.

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