Australian Stock Market Report – Afternoon 10/30/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket improved for the second consecutive session, with the All Ordinaries Index (XAO) edging higher by an unimpressive 0.1 per cent or 6.3 pts to 4505.7. Almost all sectors gained at least some ground, with the exception of energy stocks and the industrials.

Despite the improvement this has been an extremely quiet start to the trading week partly due to the super storm in New York. The New York Stock Exchange (NYSE) will be closed for the second straight day due to flooding. This is the first time in 124 years that the NYSE has been closed for two consecutive sessions due to bad weather. There are some reports that the floor of the NYSE (the world's biggest exchange) is flooded under three feet of water!

Australia's second largest airline, Virgin Australia (VAH) was one the day's best performers following a number of announcements. Firstly, one of the world's largest airlines, Singapore Airlines bought a 10 per cent stake in VAH for $105 million. Subsequently, VAH bought a 60 per cent stake in budget carrier Tiger for $35 million. This allows Tiger to expand more aggressively while simultaneously reducing competition within the industry. VAH shares jumped by 5.43 per cent or 2.5 cents to 48.5 cents while Qantas (QAN) closed unchanged at $1.34.

A number of companies held their Annual General Meetings (AGMs) today, including Crown (CWN) and Flight Centre (FLT). James Packer's casino group Crown has recorded an 8 per cent rise in revenue so far this year and discussed its plan to build a 6-star luxury resort at Barangaroo in Sydney (at the end of Darling Harbour). Australia's biggest travel agent, Flight Centre (FLT) said it is on track to meet its profit goals for the year of $305 million to $315 million. Its U.S and British businesses continue to grow. FLT slipped by 0.3 per cent or 8 cents to $26.64. CWN dropped 0.53 per cent or 5 cents to $9.38.

The major banks all ended in the black which helped keep the market positive today. Commonwealth Bank (CBA), which also held its AGM rose by 0.92 per cent or 52 cents to $57.31. ANZ Banking Group (ANZ) rose 0.59 per cent or 15 cents to $25.38, Westpac (WBC) improved by 0.36 per cent or 9 cents to $25.34 while National Australia Bank (NAB) edged higher by a modest 0.08 per cent or 2 cents to $25.88.

The miners finished mixed; however Fortescue Metals (FMG) was one of the standouts after recording a 1.74 per cent or 7 cents rise to $4.10. BHP Billiton (BHP), the world's biggest miner gained 0.41 per cent or 14 cents to $33.97 while the smaller Rio Tinto (RIO) dipped by 0.11 per cent or 6 cents to $56.86.

On the economic front today, a monthly report on the number of newly built properties sold was issued. There was a 3.7 per cent slide in home sales in September, making it the third consecutive month of falls. This is despite the substantial effort governments in Australia have made to boost construction. In NSW the New Home Grant Scheme was introduced at the start of this financial year and provides a $5000 grant towards the purchase of new homes and vacant land (on which a new home will be built).

CommSec's Chief Economist, Craig James said that "Builders, tradespeople and building material suppliers continue to do it tough. Australia's population is growing, driven by migration, while housing affordability is the best in a decade and the rental market continues to tighten. But despite an apparent increase in the underlying demand for homes, new home construction is mired at 15-year lows. So what gives? Well, in large part it is the worldwide trend for "Emerging adults" (largely Generation Y) to stay home with their parents for a longer period rather than moving out with friends or getting married. It is estimated that 70 per cent of 18-30 year olds in Italy still live at home, and while the trend is happening also in Australia, there are no formal estimates."

The second release of data from the 2011 Census was issued today and has shown that the healthcare and mining sectors continue to expand; employing a larger portion of the Australian workforce. Around 11.6 per cent of workers are involved with healthcare while the mining sector only accounts for 1.8 per cent of the workforce.

According to the Census, Australia's unemployment rate is 5.6 per cent. This is the most comprehensive measure of employment in the country, due to each household filling out the questionnaire. This compares to only a small sample size used for the monthly Australian Bureau of Statistics (ABS) data.

Mr James said that "Contrary to the view of conspiracy theorists and bush economists, the job market is strong after all. Some believe that unemployment is closer to 10 per cent rather than 5 per cent. But the most comprehensive estimates of the job market - the population census - indicate that the jobless rate was 5.6 per cent in August 2011, only slightly above the 5.3 per cent estimate from the monthly labour market survey. In August 2006 the Census found that 5.2 per cent of people were unemployed, above the 4.5 per cent estimate in the monthly survey."

In the region today, the South Korean and Chinese markets edged a little higher while shares in Hong Kong, Taiwan, Japan and New Zealand all finished the session in the red. Today was a busy day for economic data in Japan with a number of reports issued this afternoon. Industrial production in the world's third largest economy (behind the U.S and China) slumped by a worse than expected 4.1 per cent last month, while the jobless rate remained steady at 4.2 per cent as expected. Household spending dropped by a slightly higher than forecast 0.9 per cent over the month, while interest rates were kept at virtually 0 per cent.

In Europe tonight, the European Central Bank (ECB) President Mario Draghi will be delivering a speech, data on European growth (GDP) along with an unemployment report in Germany will all be issued.

U.S markets will be closed for the second consecutive session due to bad weather; however both the Case-Shiller home price report along with a consumer sentiment (confidence) reading will be released.

Tomorrow in Australia, building approvals and private sector credit numbers are out for September.

Volume of shares traded came in at 1.72 billion today, worth just $3.31 billion. 399 shares were up, 512 were weaker and 362 ended unchanged.

At 4.30pm (AEDT) on the Sydney Futures Exchange, the ASX24 futures contract is down 0.07 per cent or 3 pts to 4481.

Due to the end of daylight savings in Europe, most major European markets are now trading between 7pm (AEDT) and 3.30am (AEDT). Futures are currently pointing to a weaker start to trade tonight.

Turning to currencies, the Australian dollar (AUD) is stronger against the greenback and buys US103.6 cents. Our currency is trading at £64.5 pence and €80.1 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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