Australian Stock Market Report - Afternoon 11/28/2011

MARKET CLOSE (4.30pm AEDT)

After a very tough week and a half the Australian sharemarket has managed to hold onto the majority of its gains for the duration of the session. The All Ordinaries index (XAO) jumped 1.7 pct or 68.2 pts to 4125.8. All sectors improved today with the big banks the standout performers of the day.

The S&P/ASX 200 Financials index (a measure of performance for financial institutions) is up 2.53 pct or 94.4 pts to 3821.7. National Australia Bank (NAB) ended 4.22 pct or 92 cents higher to $22.74, Commonwealth Bank of Australia (CBA) gained 3.3 pct or $1.50 to $46.89, Westpac (WBC) rallied by 3.9 pct or 76 cents to $20.26 while ANZ Banking Group (ANZ) edged higher by 2.29 pct or 43 cents to $19.20.

The S&P/ASX 200 Materials index (a measure of mining sector performance) ended 2.47 pct or 262.2 pts higher to 10896.7. One of the best performers in the sector was mineral exploration company, Aquila (AQA) which rose 6.62 pct or 37 cents to $5.96 however had a tough end to the week with shares falling by 14 pct between last Wednesday and Friday.

Qantas (QAN) held onto most of its gains and by the close of business rose by 3.44 pct or 5 cents to $1.50. Its share price was up by close to 6 pct at one point after a company spokesperson said that despite the higher fuel costs and ongoing industrial action from its employees the airline should still post a profit of between $140 and $190 million for this half of the year.

Last week QAN shares slumped by 12 pct taking the losses for the YTD to over 45 pct. YTD stands for Year to Date and measures performance (in this instance) from the start of January 2011 to the present day.

Australia's second largest miner (and the world's third largest), RIO Tinto (RIO) held an investor seminar in Sydney to give shareholders an update on the status of its iron ore and aluminium products. The company said that it is selling all the products it can produce however has noticed that some customers are becoming a little cautious due to the current situation in the Eurozone. RIO shares rose 2.13 pct or $1.32 to $63.27 while the larger, BHP Billiton (BHP) gained 2.35 pct or 80 cents to $34.85.

Iron ore miner, Sundance (SDL) struggled today and fell by 5.88 pct or 2.5 cents to 40 cents. It has not been able to secure a letter from Chinese miner, Hanlong which has made a $1.65 billion takeover offer for the company. SDL is developing a large project in the Republic of Congo and Cameroon. Its stock was in a trading halt for much of last week.

On the economic front today, the Australian Institute of Petroleum (AIP) said that the national average price of unleaded petrol fell by 1.5 cents to 141.5 cents a litre last week. The good news for motorists it that as long as the savings are passed onto the end consumer, petrol prices at the pump should fall by another 2 to 3 cents over the next fortnight.

Commsec Economist Savanth Sebastian said that "It is encouraging to see the latest fall in petrol prices, but a further drop in fuel prices is needed to ensure that motorists are seeing the benefit of cheaper global oil prices. Since the peak on October 30, the terminal gate price has fallen by 8.4 cents a litre to near five month lows, while the retail price has fallen by just 4.8 cents. If anything the latest falls in petrol prices just offset the rise last week without giving any additional savings to motorists."

Tonight, Italy, Belgium and France are holding a bond auction. This will give us an idea how comfortable investors are with lending these Eurozone nations additional funds. This also comes only a day after Belgium had its credit rating downgraded by one of the big three ratings agencies.

In the U.S, the latest monthly report on the number of newly built properties sold to Americans last month will be released. A number of Federal Reserve members will also be delivering speeches overnight. The Federal Reserve is commonly called the Fed and is the U.S equivalent to Australia's Reserve Bank of Australia (RBA).

A central bank controls the flow of money within a country (monetary policy) and tries to manipulate it for a desired affect (such as stimulating growth by making credit/lending money cheaper).

The volume of shares traded came in at 1.89 billion today, worth $4.14 billion. 565 shares were up, 439 finished weaker and 350 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is up 0.15 pct or 6 pts to 4084.

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 stronger start to trade after managing to improve on Friday.

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 managed to claw its way back a touch and buys US98.6 cents.

Steven Daghlian, Commsec Market Analyst

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