Australian Stock Market Report - Afternoon 1/11/2012

MARKET CLOSE (4.30pm AEDT)

The Australian sharemarket gained for the second consecutive day today which has been somewhat of a rarity recently. The All Ordinaries index (XAO) ended the session 0.9 pct or 36.3 pts higher to 4242.9. In fact over the past six weeks, shares have improved for two straight sessions only three times. The last time Aussie shares rose for three consecutive days was back at the end of November 2011.

The uranium sector was one of the standouts today. One of the country's biggest uranium producers, Paladin Energy (PDN) rose 5.42 pct or 7.5 cents to $1.46 after receiving a broker upgrade. Last year was a terrible one for the sector following the earthquake, tsunami and nuclear disaster at the Fukushima Daiichi power plant in Japan. PDN fell by more than 70 pct last year while another big name in Energy Resources (ERA) slumped by more than 80 pct. Today however, ERA rose by 2.61 pct or 3 cents to $1.18 despite receiving a broker downgrade.

The S&P/ASX 200 Materials index (a way to measure mining companies' performances over the day) ended 1.64 pct or 178.4 pts higher to 11089.5. Our two biggest miners, BHP Billiton (BHP) and RIO Tinto (RIO) both rose in the order of 1.5 pct today. Australia's second largest oil and gas producer, Woodside Petroleum (WPL) added an impressive 3.18 pct or $1.00 to $32.42 today.

Commodity prices were mostly higher overnight which helped our miners lead the rest of the market into positive ground. The price of crude oil currently sits at around US$101 a barrel with the tensions between Iran and the western world keeping prices elevated. Iran is the world's third largest oil exporter behind Russia and Saudi Arabia and provides around 4.5 pct of the world's total oil. The European Union will decide if it will be imposing an embargo on Iranian oil in a fortnight's time.

The S&P/ASX 200 Financials index (a way to assess how the financials performed on any given day) rose by 0.68 pct or 26.9 pts to 4002.2 which assisted the market end the day in the black.

The financials make up over 40 pct of the Australian sharemarket. Westpac (WBC) was the day's best major bank, up 2.13 pct or 43 cents to $20.63, ANZ Banking Group (ANZ) jumped 1.59 pct or 33 cents to $21.08, Commonwealth Bank of Australia (CBA) edged higher by 0.32 pct or 16 cents to $49.94 while National Australia Bank (NAB) rose by 0.3 pct or 7 cents to $23.57.

On the economic front today, the latest quarterly report on job vacancies for the three months to December was released. The number of job vacancies fell by 3.3 pct over the period, marking the worst result in 18 months.

Commsec Economist, Savanth Sebastian said that "The slowdown in the domestic economy over the past year certainly took its toll on the labour market. Job vacancies fell by over 6 per cent in 2011, marking the biggest fall in 9 years. Not only were there less jobs on offer but even the conversion rate to job creation has been poor. In fact over the first 11 months of 2011, a paltry 44,700 news jobs were created - marking the weakest result for a similar period in 15 years. The dearth in consumer spending, slowdown in housing activity and overall tougher trading conditions for businesses has clearly taken its toll on the labour market."

Mr Sebastian also commented on the state of the Australian jobs market which is expected to worsen over the next few months. He said that "...with hiring down, unemployment is set to edge even higher in coming months. The jobless rate is likely to lift - albeit modestly - from 5.3 per cent to around the 5.5-5.75 per cent region. A softer job market will keep downward pressure on wages and prices and should provide the Reserve Bank more reasons to deliver another rate cut. CommSec expects interest rates to be once again cut in February."

In Asia today, there was no major economic data released. Yesterday, China posted a better than expected trade surplus and tomorrow the latest inflation reading will be released in China. This will be looked at closely and if it surprises on either end of the spectrum, it could impact the market.

Out of Europe last night, one of the big three ratings agencies, Fitch said it does not expect to change France's AAA credit rating this year. This has been a concern in the past because a credit rating downgrade could result in higher borrowing costs over the short term.

Tonight, Germany will be raising around €4 billion via a bond auction. Tomorrow night, both Italy and Spain will also be raising funds.

In the U.S last night, investors had their first chance to react to Alcoa's fourth quarter (October to December 2011) profit results which were mixed. The aluminium producer's share price remained relatively flat. There will be a shortage of big names releasing their earnings results over the next few days however JP Morgan Chase will be issuing its numbers on Friday night.

Tonight, the U.S Federal Reserve will be issuing the latest Beige Book. In contrast to Australia, the U.S has 12 separate central banks spread across the country. The beige book brings together anecdotal information from all these banks and gives investors a more accurate representation of how a number of regions in the U.S have performed recently. This tends to be backward looking however and usually does not have a huge impact on the market.

The volume of shares traded came in at 1.57 billion today, worth $3.74 billion. 596 shares were up, 360 finished weaker and 340 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is up 1.14 pct or 47 pts to 4169.

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

Dow Futures are currently trading lower, indicating that U.S stocks are expected to kick off trade tonight in the red. American markets open at 1.30am (AEDT). Due to the Americans going back an hour on November 5 last year, U.S markets will be trading between 1.30am (AEDT) and 8am (AEDT).

Turning to currencies, the Australian dollar (AUD) has lost a little ground over the past 24 hours and buys US102.8 cents and €80.7 cents.

Steven Daghlian, CommSec Market Analyst

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