Australian Stock Market Report – Afternoon 10/11/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket had yet another quiet day with only $3.3 billion worth of shares exchanging hands. The All Ordinaries eased by 0.1 per cent or 6.7 pts to 4505.2, losing ground for the second consecutive session and for the third time this week.

Despite today's losses, the market did improve for the majority of the trading day following the latest monthly jobs report. There were 14,400 jobs created in September which was significantly better than the 5,000 the market was anticipating. Despite the loss of 17,700 part-time positions nationwide, 32,000 full-time jobs were created. The unemployment rate rose from 5.1 per cent to 5.4 per cent which was worse than expected. The reason for the improvement in one measure and the worsening of conditions in another was the fact that the number of people entering the jobs market has increased.

Of Australia's eight states and territories, four experienced a rise in unemployment; three ended unchanged and only South Australia recorded a slight improvement from 5.7 per cent to 5.6 per cent. Tasmania has the highest unemployment rate of 7.3 per cent, which is a full 3.3 per cent higher than Western Australia. The bottom line is that the numbers weren't horrible but also not quite fantastic. The Reserve Bank (RBA) is still expected to cut interest rates for the second straight month in November. The market is factoring in a 70 per cent likelihood of a rate cut next month.

CommSec's Chief Economist, Craig James said that "The doom and gloom headlines suggest jobs are being slashed across the nation. The official jobs data suggests otherwise. In fact, the data suggests that more than 32,000 people found new full-time jobs in the latest month - hardly indicative of a parlous job market. Of course, the figures shouldn't be taken literally. The data is volatile from month to month and there is a fair margin for error. So the trend remains your friend. And the trend figures suggest that the job market is largely flat with the unemployment rate generally holding in a 5.1-5.3 per cent range. Certainly there are a number of employers that are cutting costs and thus shedding jobs. Other employers are sitting tight. And still others, especially in hospitality, health and resources, are crying out for staff."

The mining sector was the biggest drag on trade today, with the S&P/ASX 200 Materials Index slipping by 0.85 per cent or 86.2 pts to 10045.2. Australia's second largest miner, Rio Tinto (RIO) lost 0.73 per cent or 41 cents to $55.42 while the larger BHP Billiton (BHP) dropped 0.69 per cent or 23 cents to $33.25.

A recovery from the banks in the second half of the day helped minimise the losses, with Westpac (WBC) rising 0.31 per cent or 8 cents to $25.80. National Australia Bank (NAB) improved by 0.19 per cent or 5 cents to $26.25, Commonwealth Bank (CBA) rose by 0.16 per cent or 9 cents to $56.74 and ANZ Banking Group (ANZ) edged higher by 0.2 per cent or 5 cents to $25.61.

The competition watchdog, the ACCC gave the okay for News Limited's takeover of Consolidated Media (CMJ) for $1.94 billion. CMJ has a stake in Foxtel. CMJ shares rose by 1.18 per cent or 4 cents to $3.42.

The ACCC had a big day as it also allowed Sonic Healthcare's (SHL) acquisition of Healthscope's pathology business in Western Australia for $18 million. It simultaneously rejected the purchase of its Queensland business however. This should be completed by the end of the month. SHL shares edged higher by 0.22 per cent or 3 cents to $13.87.

Although not a listed business, Australia Post increased profit for the year by 16.6 per cent to $281 million. It has also announced a $2 billion investment to transform the company. This makes it the business's most significant investment in its 200 year history.

Across Asia Pacific today, most major sharemarkets finished in the red. Shares in Taiwan performed worst and fell by 1.85 per cent. Keep in mind that the Taiwanese sharemarket was closed yesterday due to a public holiday. Shares in Japan eased by 0.58 per cent or 49.45 pts to 8546.78. Shares in China dropped 0.74 per cent while Hong Kong's Hang Seng finished flat.

In Europe, both German and French inflation numbers will be issued along with a 30-year bond auction in the U.K.

In the U.S weekly unemployment claims, a report on international trade and crude oil inventory numbers will all be released.

Volume of shares traded came in at 1.57 billion today, worth just $3.41 billion. 423 shares were up, 560 were weaker and 334 ended unchanged.

At 4.30pm (AEDT) on the Sydney Futures Exchange, the ASX24 futures contract is unchanged at 4477.

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) gained considerable ground against the greenback following mostly better than forecast employment growth. The AUD now buys US102.66 cents. Our currency is trading at £64.1 pence and €79.9 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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