Australian Stock Market Report - Afternoon 11/22/2011

MARKET CLOSE (4.30pm AEDT)

The Australian sharemarket unfortunately fell for the third straight day today with the All Ordinaries index (XAO) down 0.7 pct or 29.4 pts to 4204.2. Although today was not an ideal session, keep in mind that shares in the U.S fell by over 2 pct while the European markets fell by as much as 3.5 pct.

Last night global markets only extended their losses with each passing hour while the Australian markets did the opposite. In the first 30 minutes of trade, the XAO fell by as much as 1.5 pct however managed to eat away at those losses for the majority of the session.

The S&P/ASX 200 Materials index (which is a broad measure of how the miners have performed for the day) fell by 0.99 pct or 111.2 pts to 11114.4. Australia's third largest miner RIO Tinto (RIO) fell 2.12 pct or $1.40 to $64.50 while the larger BHP Billiton (BHP) eased by 0.84 pct or 30 cents to $35.60.

The S&P/ASX 200 Financials index (a measure of how the banks and financial institutions performed) fell 0.48 pct or 18.6 pts to 3876.8. All major banks lost ground with ANZ Banking Group (ANZ) down 1.06 pct or 21 cents to $19.54, while Commonwealth Bank of Australia (CBA), Westpac (WBC) and National Australia Bank (NAB) all eased by around 0.3 pct.

Qantas (QAN) shares fell 4.27 pct or 7 cents to $1.57 taking the falls for the year so far to almost 40 pct. This comes after the airline and the workers' unions could not agree on a compromise on working conditions leaving arbitration as the next option. Fair Work Australia will now need to decide what takes place from here.

Over 80 Australian companies held their Annual General Meetings (AGMs) with shareholders today. This included internet service provider iiNet (IIN) only a day after announcing that it would buy TransACT for around $60 million. The company (TransACT) has around 150,000 customers, ended flat on the sharemarket today but gained by over 6 pct yesterday.

Shares in Japan, Hong Kong and China all lost some ground today while South Korea's KOSPI index was one of the few to end higher. The Tokyo Stock Exchange and the Osaka Stock Exchange (Japan's two largest sharemarkets) said they would merge in 2013.

Last night in Europe one of the big three ratings agencies, Moody's Investor Services said it was concerned with the high borrowing costs for the French government in addition to a more uncertain future in the region. France still holds the highest possible rating of AAA.

This news comes only a week after Standard & Poor's (another of the big three ratings agencies) announced the downgrade of France's credit rating by error.

Borrowing costs for the French, Italian and Spanish governments have continued to rise and are getting close to unsustainable levels. Borrowing costs for Germany's government has actually eased slightly.

France has around seven times greater exposure to Greece's debt than the U.S.

No major economic data is scheduled for release in Europe tonight. In the U.S the latest growth report will be issued prior to the market open. Tomorrow morning, at around 6am (AEDT) the U.S Federal Reserve's minutes will be out from their previous monthly meeting on rates and monetary policy. This could give us an insight into the thinking of the U.S central bank (to an extent) when it comes to action steps needed to improve the situation in the U.S.

Despite the significant amount of stimulus which has taken place over the past few years (the printing of money), this has not resulted in an improvement in the job story. The unemployment rate is still uncomfortably high in the world's largest economy at 9 pct.

Keep in mind that the printing of money does have its consequences as we all know that money does not grow on trees. The Federal Reserve however (the American version of Australia's Reserve Bank) has the right to print as much of it as it wishes without the need for Congress approval. This could potentially result with in hyperinflation (the U.S dollar losing significant value and hence prices rising). This would hurt almost all Americans. Retirees' life savings could be worth significantly less at no fault of their own.

The volume of shares traded came in at 2.2 billion today, worth $5.18 billion. 281 shares were up, 697 finished weaker and 353 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is up 0.02 pct or 1 pt to 4153.

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 slightly stronger start to trade tonight.

Dow Jones futures are currently higher, indicating that U.S stocks could start in the black 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 against the greenback and buys US98.5 cents.

Steven Daghlian, Commsec Market Analyst

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