Australian Stock Market Report - Afternoon 10/27/2011

MARKET CLOSE (4.30pm AEDT)

Today was one of the more unpredictable days of trade for the Australian sharemarket, with the ASX 200 index (XJO) rising 2.5 pct or 105.7 pts to 4348.2 while the broader All Ordinaries index (XAO) ended 2.4 pct or 103.1 pts higher to 4403.9.

The Australian sharemarket was closed for the majority of the session and only traded for two hours, between 2pm (AEDT) and 4pm (AEDT) due to a technical glitch at the open of trade this morning. An explanation as to the reasons for the glitch has still not been released by the ASX.

The XAO still managed to crack through the 4400 point mark for the first time since the start of August with a number of stocks hitting one month highs at minimum.

A three pronged deal to 'fix' the Eurozone's debt crisis was announced by European leaders at around lunch today. This was the main catalyst for gains in markets. Private European banks holding Greek debt have agreed to accept a 50 pct haircut (loss) on their holdings of Greek bonds. The size of the European Financial Stability Facility (EFSF), which is its main rescue/bailout fund, was increased from 440 billion Euros to 1 trillion Euros. In addition to this, the European banks will also be required to raise new capital to minimise the potential effects of future problems out of nations such as Italy and Spain.

The European leaders met for around 10 hours before coming to agreement today. France by far has the most significant exposure to Greek debt at around 57 billion Euros, which is around 70 pct more than Germany's exposure. This just shows you one of the reasons why both nations have been so keen to have a solution in place to deal with Greece's debt. The U.K on the other hand only has around a quarter of France's exposure while the U.S's direct risk from a Greek default is significantly less than the U.K's.

Keep in mind that Europe is a very important trading partner of the United States, and accounts for more than 20 pct of all goods exported to Europe, totalling more than US$400 billion. 35 pct of services exported from the U.S find their way to Europe. Problems in both the U.S and Europe also have far reaching affects on the world. Both regions make up around 60 pct to 70 pct of the world's total banking assets.

The world's largest miner, BHP Billiton (BHP) gained 3.82 pct or $1.41 to $38.35 while RIO Tinto (RIO) gained 4.44 pct or $2.96 to $69.70.

The big four banks rose strongly today with National Australia Bank (NAB) gaining 3.69 pct or 92 cents to $25.87 following its full year profit results which was mainly in line with expectations.

The retailers rallied, with David Jones (DJS) up 5.06 pct or 17 cents to $3.53, while Myer (MYR) rose 3.5 pct or 9 cents to $2.66.

The New Zealand central bank decided to keep rates unchanged at 2.5 pct today while Japan also kept its rates steady.

Indian sharemarkets were closed today due to a public holiday.

Tonight, America's Gross Domestic Product (GDP) reading will be released for the September quarter. The market is expecting the U.S economy to have expanded slightly. The number of weekly unemployment claims and pending home sales will be out overnight also.

It will be a big night in the U.S in relation to earnings results, with Barrick Gold, Colgate Palmolive, Exxon Mobil and Motorola Solutions all posting their third quarter profit numbers throughout the night.

The volume of shares traded came in at 1.3 billion today, worth $4.25 billion. 658 shares were up, 271 finished weaker and 313 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.11 pct or 5 pts to 4363.

Most major European markets trade between 6pm (AEDT) and 2.30am (AEDT). Futures in Europe are pointing to a stronger start to trade tonight.
Dow Jones futures are up 1.34 pct or 158 pts to 11960, indicating that U.S shares will likely kick off the session in positive territory when American markets open at 12.30pm (AEDT).

Turning to currencies, the Australian dollar (AUD) has gained close to US2 cents against the greenback over the past 24 hours and buys US105.3 cents.

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