Australian Stock Market Report – Afternoon 10/24/2012

AFTERNOON REPORT
(5pm AEDT)

A weak offshore lead impacted local stocks today, sending the Australian share market down 0.8pct. Worries about Spain's spiking borrowing costs saw European markets hit 6 week lows while US investors were spooked by disappointing earnings results. Adding to the downbeat mood, ratings agency Moody´s downgraded five Spanish regions. The All Ordinaries Index closed down 37.4pts to 4530.6.

The main focus for local investors today was the local inflation data and Chinese manufacturing numbers.

The Consumer Price Index - the main measure of inflation in Australia - rose by 1.4pct in the September quarter, modestly higher than expectations. In seasonally adjusted terms the CPI rose by 1.2pct. The CPI stands two percent higher than a year ago.

The most significant price rises this quarter were for electricity (+15.3 per cent), international holiday travel and accommodation (+6.6 per cent) and medical and hospital services (+4.5 per cent). The most significant price falls this quarter were for automotive fuel (-3.9 per cent) and motor vehicles (-1.0 per cent).

"Despite the latest inflation reading being higher than consensus, inflation remains well within the Reserve Bank's target band," said CommSec Economist Savanth Sebastian of the data. "(And)... as such the Reserve Bank can afford to cut rates and support confidence. CommSec expects rates to be cut by a quarter of a per cent in November."

Meanwhile, the flash PMI or manufacturing data out of China, showed the industry has improved, but is still contracting. The flash PMI reading came in at 49.1, up from a reading of 47.9 in September. Anything below 50 shows contraction.

AGM season once again dominated on the share market.

Fairfax Media (FXJ) shares rebounded from record lows after executives reassured shareholders at the company's AGM that a strategic review would help turn its fortunes around. FXJ today added 7.8pct to $0.41.

Over at Billabong (BBG), the company's Chairman moved to reassure shareholders that despite challenging trading conditions, things were looking up, with encouraging signs in Australia and New Zealand. Founder Gorgon Merchant managed to retain his position on the company's board despite his rejection of an $854 million takeover offer from private equity firm TPG back in February which has upset investors. BBG shares today rose by 0.6pct to $0.86.

Shares in mining services company WorleyParsons (WOR) fell to a new 12 month low today, down 6pct to $23.86 after the company delivered more subdued earnings guidance at its AGM and announced a $100 million acquisition of a South African mining services company.

Whitehaven Coal (WHC) shares were placed in a trading halt at $3.20 after the company moved to respond to demands from its largest shareholder, mining magnate Nathan Tinkler. Mr Tinkler is seeking more information on the company's operational and financial status given weakness in the coal market. WHC says it will update the market on Friday.

The Ten Network (TEN) slumped to new record lows, down 8.2pct to $0.28. TEN yesterday announced its 2013, while debt concerns remain as the company moves to implement cost cutting measures. Private equity firm Champ came in with a reduced $110 million offer for Ten's outdoor advertising business EyeCorp yesterday, $35 million less than the offer it walked away from last week.

Elsewhere today, shares in Macquarie Group (MQG) were down 2.2pct to $29.97 while Fortescue Metals Group (FMG) added 1pct to $4.25.

On the market overall, a total of 1.6 billion shares were traded, worth $4.2 billion. 355 were up, 614 were down and 324 were unchanged.

The Australian dollar ended the day's session at US103.07c, €79.4c and £0.6462.

Ahead tonight, the Federal Reserve's rate decision and new home sales are released in the US.

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