Australian Stock Market Report – Afternoon 1/16/2013

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket managed to improve for the second time this week today, with the All Ordinaries Index (XAO) up 0.5 per cent or 22 pts to 4765.0. Today was the busiest day on the market in terms of volume so far this year; with $4.12 billion worth of shares exchanging hands.

We received a mixed lead from global markets overnight, with shares in the U.S rising by around 0.2 per cent while shares in France and Germany lost some ground. Retail spending rose by 0.5 per cent in December, which was better than most expectations. Facebook unveiled its new 'graph search' overnight which is still in its early stages of development. Essentially it is a feature that could allow users to look up the interests of their friends; what type of books they like, music and where they've been on holiday for example. It is probable that privacy will remain a concern for users. Facebook reportedly had 1.4 million fewer users in early December 2012.

One of the standouts today was building and construction materials company, Boral (BLD) which rose 10.09 per cent or 44 cents to $4.80. BLD had its best day in recent history due to the announcement of a companywide restructure aimed at cutting costs and improving competitiveness.

Australia's third largest telco, Vodafone Australia announced it would shut its Crazy Johns business. It cost Vodafone around $150 million to buy the brand and Crazy Johns has been around for 20 years.

Surfwear retailer, Billabong (BBG) slipped by 1.53 per cent or 1.5 cents to 96.5 cents however jumped by 16 per cent yesterday following it receiving its second takeover offer from a U.S group a few days ago.

The mining and energy companies held the market back today, with BHP Billiton (BHP) down 0.77 per cent or 28 cents to $36.25 while the smaller Rio Tinto (RIO) slipped by 0.53 per cent or 35 cents to $65.55. The miners underperformed the broader market in 2012 and continue to do so. Mining stocks are down 0.36 per cent this year, whereas the All Ords is up by around 2 per cent.

The four major banks all improved, with Commonwealth Bank of Australia (CBA) jumping 0.87 per cent or 54 cents to $62.29. National Australia Bank (NAB) rose by 0.54 per cent or 14 cents to $25.85 while both Westpac (WBC) and ANZ Banking Group (ANZ) edged higher by around 0.3 per cent.

Plenty of economic data was issued earlier in the day, including consumer sentiment, new car sales and lending finance reports. According to the monthly reading on confidence (consumer sentiment), Australians are slightly more confident now than they were a month ago. The Westpac/Melbourne Institute index of consumer confidence rose modestly in January, up 0.6 per cent to 100.6. A reading above 100.0 indicates optimism.

CommSec Economist Savanth Sebastian said that "At first glance the latest reading on consumer confidence suggests that not much has changed in the past month. But nothing could be further from the truth. Digging a little deeper it is clear that there is an underlying level of optimism across the country. Interestingly the national reading on consumer confidence (which is seasonally adjusted) was largely unchanged, although it was up almost 4 per cent on a year ago. And in unadjusted terms confidence lifted by 5 per cent with all the states also recording substantial gains in confidence. For instance, consumer confidence rose sharply in Queensland, up by almost 10 per cent, with Western Australia and South Australia not far behind. Even NSW and Victoria record healthy gains in confidence. In short, consumers have kicked off 2013 with more optimism and we expect that to continue in coming months. Looking across the demographics, it was clear that the 18-24 year olds were the prime culprits in pulling the national consumer confidence index down. In fact the other age groups were decidedly optimistic."

There was also a pickup in the number of newly built cars sold last month. Car sales rose by 2.2 per cent in December after rising just 0.2 per cent in November. There were over 1.1 million new motor vehicles sold in Australia in 2012.

Mr Sebastian commented on the statistics, saying that "The other encouraging news is the 2.2 per cent lift in new vehicle sales to record highs in December. The strength of the Australian dollar and discounting by manufacturers is making new vehicles more affordable. Car affordability is at the best levels since the 1970s, and coupled with the recent rate cuts, it seems to have prompted consumers to update their rides."

Despite the improvements in both consumer confidence and car sales, consumers are certainly not overly keen to take on additional debt. Lending slumped by 4.0 per cent in November (seasonally adjusted data), following a 2.4 per cent rise in October.

In the region, the number of machinery orders rose significantly more than expected in Japan, however wasn't sufficient to lift the Japanese market higher. The Nikkei 225 index fell by 2.52 per cent to 10605.17.

In Europe tonight, the latest trade balance will be out in Italy at 8pm (AEDT), along with Eurozone inflation at 9pm (AEDT) and a 10-year bond auction in Germany.

It will be busy in North America tonight, with consumer prices (inflation) and industrial production out for December. The NAHB housing market index is out at 2am (AEDT), crude oil inventory numbers will be out at 2.30am (AEDT) and the Fed's Beige Book is out at 6am (AEDT) tomorrow morning. This is essentially a summary of conditions across the Fed's 12 districts in North America. It is issued eight times each year. The report includes anecdotal evidence which is supplied by each of the Federal Reserve banks; is compiled and then distributed as one document. For those interested, the document should be publically available on the central bank's website at www.federalreserve.gov.

On the earnings front, eBay, Goldman Sachs, JP Morgan Chase, Northern Trust and BNY Mellon will all be issuing their profit numbers overnight in the U.S

Volume of shares traded came in at 1.54 billion today, worth just $4.12 billion. 573 shares were up, 378 were weaker and 358 ended unchanged.

At 4.30pm (AEDT) on the Sydney Futures Exchange, the ASX24 futures contract is down 0.09 per cent or 4 pts to 4701.

Due to the end of daylight savings in Europe, most major European markets are now trading between 7pm (AEDT) and 3.30am (AEDT). Futures are currently pointing to a strong rise at the start of trade tonight in Europe.

U.S futures are also pointing to a slight drop on the market tonight. Due to the start of daylight savings in Australia and its end in the U.S, American markets will now be trading between 1.30am (AEDT) and 8am (AEDT).

Turning to currencies, the Australian dollar (AUD) rose as high as US105.8 cents, before pulling back slightly. One AUD buys US105.5 cents, is trading at £65.7 pence and €79.4 cents.

Australia is a commodity based economy, with commodities in general accounting for almost 80 pct of all our exports over the past nine months. In essence, when the going gets tough globally, there is fear of less demand for our commodities, which tends to result in a weaker AUD.

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