Australian Stock Market Report - Afternoon 1/19/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket was improving for almost the duration of the session and at one point was close to 1 pct higher. In the last two minutes of trade, shares pulled back by just a few points with the ASX 200 index down 0.1 pct or 3.1 pts to 4214.8.

Commodity prices were mixed last night with the price of oil falling slightly, gold rose and base metals were mixed. Overnight, unions in Nigeria (which is one of Africa's biggest oil exporters) called off strikes over the removal of oil subsidies. The removal of these subsidies almost doubled the prices being paid by Nigerians for petrol.

Iron ore miner, Fortescue Metals (FMG) rose by around 0.2 pct today and has improved by more than 5 pct so far this week. This was off the back of its production report a few days ago. The world's largest miner, BHP Billiton (BHP) rose 0.92 pct or 34 cents to $37.34 while the smaller RIO Tinto (RIO) edged higher by 0.23 pct or 15 cents to $66.75.

One of Australia's largest insurers, QBE Insurance (QBE) fell 2.44 pct or 28 cents to $11.20. Last week QBE shares slumped by around 16 pct following a profit warning it gave to the market. QBE said that profit in 2011 will be significantly lower than in 2010 partly due to a number of natural disasters.

The four major banks ended mostly higher with the exception of Commonwealth Bank (CBA) which eased by 0.08 pct or 4 cents to $49.80. National Australia Bank (NAB) was the best after rising by 0.93 pct or 22 cents to $23.88, Westpac (WBC) rose 0.15 pct or 3 cents to $20.60 and ANZ Banking Group (ANZ) gained 0.14 pct or 3 cents to $20.82.

There were some disappointing job numbers released by the Australian Bureau of Statistics (ABS) today which showed that 29,300 jobs were lost in December alone. This was the worst month of job losses in eight months and 2011 was the worst year for the jobs market since 1992.

Commsec Economist Savanth Sebastian today said that "Interestingly December tends to be affected by seasonal factors, such as a pickup in hiring in the retail and service sectors. However this time it seems that retailers have been a lot more cautious, culling hiring plans due to the lack of consumer spending. In fact in original terms around 115,000 jobs were created in the December, compared with the decade average of 161,000 jobs. Clearly the seasonal workers bore the brunt of the weakness."

He went on to say that "The lack of momentum in the domestic economy is clearly being reflected in the labour market. Trading conditions have been tough over the past year and the ongoing impact on profitability is hurting businesses. And after holding out for the past six months Aussie businesses have finally decided to bite the bullet and start culling staff - albeit modestly."

Out of the U.S last night, the latest producer prices index (prices paid by American producers for goods) rose by 0.3 pct in December which was a bigger than expected rise. A number of companies released their corporate earnings including the Bank of New York and Goldman Sachs. The market was expecting a very disappointing result from Goldman Sachs due to the European debt crisis however; earnings came in a little better than expected. Its shares rose by over 7 pct.

Tonight, the latest Consumer Prices index (CPI) will be released but is not expected to be a concern for investors. This measures the change in prices paid by American consumers over the previous month.

Tonight will also be the busiest session of the reporting season with Advanced Micro Devices (AMD), American Express, Bank of America, Google, IBM, Intel and Microsoft all releasing their earnings results. AMD is one of the world's largest chipmakers.

Out of Europe last night, both Germany and Portugal raised funds via the bond market at lower borrowing costs. The U.K's unemployment rate rose from 8.3 pct to 8.4 pct which was worse than expected.

Tonight, government debt auctions will be carried out by Spain, France and the U.K. No major economic data will be released with the exception of the European Central Bank's (ECB) Monthly Bulletin. This report reveals the statistical information used by the ECB to make its latest interest rate decision. Rates were kept on hold at 1 pct this month by the central bank.

No major data was released in the Asian region today.

The volume of shares traded came in at just 1.79 billion today, worth $4.65 billion. 455 shares were up, 505 finished weaker and 388 ended unchanged.
At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is up 0.12 pct or 5 pts to 4197.

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 tonight.

Dow Futures are currently higher, indicating that U.S stocks are expected to kick off trade tonight in the black. American markets open at 1.30am (AEDT). Due to the Americans going back an hour on November 5 last year, U.S markets will be trading between 1.30am (AEDT) and 8am (AEDT).

Turning to currencies, the Australian dollar (AUD) buys US103.8 cents and €80.8 cents. The AUD is also trading at close to a 27 year high against the sterling and buys £67.3 pence.

Steven Daghlian, CommSec Market Analyst

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