Australian Stock Market Report – Afternoon 11/5/2012

AFTERNOON REPORT
(5pm AEDT)

Local stocks received a boost in the afternoon session, after a volatile day which saw the main index see-saw between positive and negative territory. By close, the All Ordinaries Index (XAO) was firmer by 10.3pts or 0.2pct to 4493.6.

Westpac (WBC) today came out with its full year cash profit, a rise of 5pct to $6.6 billion. Net profit fell 15pct to $5.97 billion due to tax implications from its takeover of smaller rival St George. Westpac CEO Gail Kelly today called for the Reserve Bank to deliver another rate cut when it meets tomorrow, saying it would be beneficial for consumer confidence. Ms Kelly also reiterated that bank funding costs remain high "We are not yet at the position where average funding costs are coming down," she said today. WBC shares have risen 25pct year to date. Meanwhile, Macquarie Group (MQG) also looked strong today, its share price firmer by 1.6pct to $31.14.

Mining stocks were also firm. Shares in index leader BHP Billiton (BHP) rose 1.2pct to $34.82 while Rio Tinto (RIO) was up 2.6pct to $58.88.

Retail stocks suffered today, with retail trade down 0.1pct in real (adjusted) terms in the September quarter. Outdoor wear retailer Kathmandu (KMD) traded without rights to its dividend, falling 5pct to $1.30. David Jones (DJS) shares lost 4.2pct to $2.49 as more than three million shares at $2.596 were allocated under its dividend reinvestment plan.

Looking at the retail numbers in detail; spending was up 0.5pct in September. But over the September quarter, retail trade fell 0.1 per cent in real (inflation-adjusted) terms.

Real spending on hardware, building and garden supplies soared by 4.9pct in the September quarter while spending on newspapers & books slumped by 3.6pct. Spending at department stores recorded the biggest quarterly fall in seven years.

In other data released today; the TD Securities-Melbourne Institute monthly inflation gauge rose by just 0.1pct in October to stand 2.4pct higher than a year ago.

The Performance of Services index rose by 0.9 points to 42.8 in October. A reading below 50 suggests contracting activity. The sector has contracted (reading has been below 50 points) for the past nine months.

According to the Australian Institute of Petroleum, the national average retail petrol price fell by 4.4 cents to 144.4 cents a litre in the past week. Over the past three weeks the terminal gate (wholesale) price of fuel has fallen by 9.1 cents a litre to 131.3 cents a litre - a three month low. Similarly the Singapore gasoline price has fallen by $15 a barrel in Aussie dollar terms in the past three weeks and is holding at the weakest levels in four months. CommSec expects the national average retail petrol price (pump price) to ease by a further 4 cents a litre over the next fortnight.

Australia recorded a trade deficit of $1,456 million in September, following a downwardly-revised $1,876 million (previously $2,027 million) deficit in August.

The number of job advertisements fell for the seventh straight month, dropping by 4.6 per cent in August to stand 15.0 per cent lower for the year.

Of today's economic data, CommSec Chief Economist Craig James said "There are good reasons for the Reserve Bank to deliver a final interest rate cut and then retire to the sidelines. But what also may be required is some indication or time-frame about how long rates will remain at lows. Because the Reserve Bank can cut rates, but if people don't believe rates will remain low for more than a few months, few will be enticed to borrow, spend, invest or employ."

Money markets remain on the fence in regards to a rate cut tomorrow, on Melbourne Cup Day. There's a 56pct chance according to the latest figures that the RBA will deliver more economic stimulus and cut the official cash rate to 3pct.

The Australian dollar ended the day's session at US103.69c, €80.8c and £0.6468.

On the market overall, a total of 1.49 billion shares were traded, worth $3.79 billion. 412 were up, 551 were down and 354 were unchanged.

At 5pm AEDT the SFE 200 Futures was at 4458, up 13pts or 0.3pct. The Dow Futures was at 13031, up 40pts or 0.3pct.

Ahead tonight, the services gauge is released in the US.

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