Australian Stock Market Report – Afternoon 1/17/2013

AFTERNOON REPORT
(5pm AEDT)

Despite a slight tick-up in Australia's unemployment rate, the local share market rallied today edging 20 month highs. By close, the All Ordinaries Index (XAO) was up 14.7pts or 0.3pct to 4779.7.

Overnight, US and European markets ended mixed. Shares in Boeing fell 3.4pct after Japanese airlines grounded their 787 Dreamliner aircraft in the wake of recent dramas. The US Federal Aviation Administration followed suit this morning. Bargain hunters in the US embraced Apple, sending its share price up 4.2% while financial firms Goldman Sachs & JP Morgan Chase rose on better than expected earnings results.

Financial stocks on our market were firmer. Shares in Westpac (WBC) were firmer to $26.62 while the ANZ Bank (ANZ) gained 0.8pct to $25.57.

Index leader BHP Billiton (BHP) was firmer by 0.3pct to $36.34 but a fall in the iron ore price impacted Rio Tinto (RIO) and Fortescue Metals Group (FMG). Shares in RIO fell 1.5pct to $64.60 while FMG was off 4.2pct to $4.38. Iron ore posted its biggest daily drop in 14 months overnight on uncertainty over steel demand from top consumer China.

Woodside Petroleum (WPL) and Santos (STO) released production numbers today. WPL's full year output rose thanks to outperformance at its Pluto LNG operations while STO lifted FY prod by around 10%. WPL closed steady today at $35.20 while STO was firmer by 0.7pct to $11.72.

The Australian Competition and Consumer Commission (ACCC) has granted interim authorisation for the proposed Qantas / Emirates partnership with a final decision on the alliance expected by March. QAN CEO Alan Joyce today said the interim authorisation will allow the two airlines to co-ordinate more closely and enable customers to book travel on most parts of the combined network. Fees on the combined network, for travel from April 2013, expected to be available in coming weeks once pricing discussions have taken place. Qantas shares fell 1.3pct today to $1.52 while rival Virgin Australia (VAH) was steady at $0.43.

Leighton Holdings (LEI) has won a three year, $90 million deal with Telstra (TLS) to carry out work to prepare Telstra's pits and pipes for the National Broadband Network. LEI shares fell by 0.7pct today to $19.06 while TLS was steady at $4.48.

Employment fell by 5,500 in December after an upwardly-revised gain of 17,100 jobs in November (previously +13,900). Economists had expected a flat result.

In December, full-time jobs fell by 13,800 after falling by 6,300 in November. Part-time jobs rose by 8,300 after rising by 23,500 in November.
The unemployment rate rose from 5.3 per cent to 5.4 per cent in December. The participation rate was steady at 65.1 per cent - near six year lows.

The number of hours worked fell by 0.1 per cent in December after an upwardly-revised gain of 0.8 per cent in November. Hours worked stand 0.1 per cent higher than a year ago.

Unemployment across the states and territories: NSW 5.1 per cent (5.0 per cent in November); Victoria 5.6 per cent (5.5 per cent); Queensland 6.2 per cent (6.1 per cent); South Australia 5.8 per cent (5.3 per cent); Western Australia 4.3 per cent (4.1 per cent); Tasmania 7.3 per cent (6.7 per cent); Northern Territory 3.8 per cent (3.9 per cent); ACT 4.2 per cent (4.1 per cent).

"The Reserve Bank must stand poised to cut rates as necessary. But the latest jobs data is no smoking gun," said CommSec Economist Savanth Sebastian of the data. "The job market has softened, but not dramatically. Rather the Reserve Bank will look to the improving conditions in the global economy, rising share markets, healthy house prices and may hold off in cutting rates in February. In addition the prior rate cuts are still working through the economy."

The Australian dollar ended the day's session at US105.07c, £0.6568 and €79.1c.

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