Australian Stock Market Report - Afternoon 11/21/2011

MARKET CLOSE (4.30pm AEDT)

The Australian sharemarket lost ground for the fourth time in five days today with the All Ordinaries index (XAO) easing 0.3 pct or 13.1 pts to 4233.6. The market was split in half today with the energy, industrial, healthcare and telecommunication services all ending higher however weakness from the mining and financial sectors was enough to drag the broader market into the red.

Last week the Australian sharemarket fell by more than 2.5 pct, shares in the U.S dropped by 3 pct, France's CAC40 index fell 5.3 pct, the U.K's FTSE slumped by 3.29 pct while Germany's DAX plummeted by 4.24 pct.

In terms of the weighting of the different sectors which make up the S&P/ASX 200 index, the financials currently make up around 38 pct of the index, the miners account for around 24 pct, consumer services such as the retailers make up 11 pct while the remaining sectors account for the balance.

The S&P/ASX 200 Materials index (a measure of how the miners have performed for the day) fell 0.94 pct or 106.4 pts to 11225.6 with the world's third largest miner RIO Tinto (RIO) falling by 1.72 pct or $1.15 to $65.90 while the larger BHP Billiton (BHP) eased by 0.64 pct or 23 cents to $35.90.

The S&P/ASX 200 Financials index (a measure of how the big banks and financial institutions performed) dropped 0.43 pct or 17 pts to 3895.4. The fact that these sectors combined make up around 62 pct of the Australian sharemarket was the reason for today's weakness. ANZ Banking Group (ANZ) fell 1.55 pct or 31 cents to $19.75, National Australia Bank (NAB) slumped 1.11 pct or 26 cents to $23.20 and Commonwealth Bank of Australia (CBA) eased by 0.38 pct or 18 cents to $47.5. Westpac (WBC) managed to rise by a modest 0.25 pct or 5 cents to $20.42.

Qantas (QAN) shares were a touch higher early in the session with the airline expressing its optimism that an agreement would be reached with pilots by tonight's deadline. However as the day wore on it became clear that this would not be the case with a QAN spokesperson saying that it 'was not possible to reach an agreement'. A period of compulsory arbitration will now be taking place between parties. QAN shares fell 1.2 pct or 2 cents to $1.64.

This week there will be more than 450 Australian companies holding their Annual General Meetings (AGMs) with shareholders. Thursday will be the busiest day of them all with over 130 businesses meeting. The likes of Woolworths (WOW), Goodman Fielder (GFF) and Jetset Travelword (JET) will all be holding their AGMs.

Internet service provider iiNet (IIN) has announced its intention to buy TransACT for $60 million one day ahead of its AGM. TransACT is an Australian telco based in Canberra and provides services to around 150,000 customers. IIN shares gained 8.05 pct or 19 cents to $2.55.

Agricultural markets have continued to remain subdued with the price of corn falling while wheat ended a little higher. As an interesting sidenote, Australia is the third largest exporter of sugar cane accounting for around 3 pct of total global production. Brazil makes up around 52 pct of the world's sugar exports.

In Europe over the weekend, Spain became the fifth Eurozone nation to change its government in only a matter of months. Portugal, Italy, Ireland and Greece were the other highly indebted nations in the Euro Area to change leadership over the past few months. The European Union is made up of 27 nations formed to facilitate trade and cooperation. The Eurozone which is also referred to as the Euro area consists of the 17 nations sharing the common Euro currency.

On the economic front the Australian Institute of Petroleum (AIP) said that the national average price of unleaded petrol rose by 1.4 cents to 143 cents a litre last week. This is despite continued weakness in wholesale prices. Normally, you would expect savings of around 2 to 3 cents a litre at the pump over the next fortnight.

Commsec Economist, Savanth Sebastian said that "Petrol prices have risen against the grain. It is disappointing to see that the cheaper wholesale fuel prices have not flown through to pump prices to the same extent as we expected. Granted the national average petrol price fell sharply by almost five cents a litre in a two week period from October 30 - November 13, however the fall in pump prices pales in comparison with the slide in the wholesale (terminal gate) price of petrol which is holding close to five month lows."

Tonight will be quiet on the economic front with the main area of focus being the U.S existing home sales data which will show us how many properties were sold throughout North American over the past month.

The volume of shares traded came in at 1.8 billion today, worth $3.61 billion. 382 shares were up, 618 finished weaker and 390 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 0.12 pct or 5 pts to 4181.

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 Jones futures are currently lower, indicating that U.S stocks could start in the red tonight when American markets open at 1.30am (AEDT). Due to the Americans going back an hour on November 5, U.S markets will be trading between 1.30am (AEDT) and 8am (AEDT).

Turning to currencies, the Australian dollar (AUD) has lost some ground and is trading below parity against the greenback for the first time in over a month at US99.8 cents.

Steven Daghlian, Commsec Market Analyst

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