Australian Stock Market Report - Afternoon 12/05/2011

MARKET CLOSE (4.30pm AEDT)

The Australian sharemarket managed to extend its gains in the second half of the day with the All Ordinaries index (XAO) rising 0.8 pct or 33.2 pts to 4379.5. This makes it the sixth straight day the market has improved adding to the 7 pct gains posted last week.

The S&P/ASX 200 Materials index (a way to measure the performance of the mining sectors) rose 1.03 pct or 118.7 pts to 11587.5. Mining giants BHP Billiton (BHP) and RIO Tinto (RIO) both extended their gains as the session progressed. BHP rose 1.66 pct or 61 cents to $37.26 while RIO gained 1.03 pct or 68 cents to $67.00.

The S&P/ASX 200 Financials index (a measure of Australia's listed financial institutions such as the big four banks) rose by 0.77 pct or 31.3 pts to 4110.2. This was one factor which lifted the broader market higher today, with ANZ Banking Group (ANZ) up 0.81 pct or 17 cents to $21.05, Commonwealth Bank (CBA) ended strongly to finish the day 0.83 pct or 41 cents better to $49.96, Westpac (WBC) gained 0.56 pct or 12 cents to $21.69 and National Australia Bank (NAB) rose by 0.41 pct or 10 cents to $24.65.

Australia's largest airlines also gained strongly with Qantas (QAN) up 2.49 pct or 4 cents to $1.64 while Virgin Australia (VBA) ended flat. It was announced today that Sydney Airport is expected to undergo a major overhaul to increase capacity and reduce connection times.

The S&P/ASX 200 Energy index (a measure of the performance of Australian oil and gas producers) rose by 0.99 pct or 137.7 pts to 14091.1. The country's second largest oil and gas producer, Woodside Petroleum (WPL) rose 2.67 pct or 7 cents to $34.19 while the smaller Santos (STO) ended 0.67 pct or 9 cents to $13.54. Integrated energy company, Origin Energy (ORG) gained 0.61 pct or 9 cents to $14.89. ORG is expected to take a 40 pct stake in two Australian exploration blocks owned by the Empire Oil Company.

New Zealand's Treasury cut growth forecasts for the 12 month period to March 2013 to 3 pct (from a previously estimated 3.4 pct). They have said that the uncertainty in the Eurozone was one of the major risks potentially affecting the nation's growth prospects.

On the economic front today, a report showed that there was no change in the number of jobs advertised by businesses over the previous month. Commsec's Chief Economist, Craig James said that "Employers are still not hiring: According to ANZ, job advertisements were flat in November (up less than 0.1 per cent) and were up just 0.2 per cent on a year ago. Previously job ads had fallen in six of the past seven months."

Tonight, the latest report on the confidence levels of European investors will be released in addition to the state of the British manufacturing industry and the monthly report on retail sales for the Eurozone (to what extent the European consumer is spending at retail outlets).

This week is set to be the busiest one of the month with a number of key readings released over the coming days. Tomorrow, the Reserve Bank of Australia (RBA) is holding its monthly meeting on monetary policy. The market seems to be expecting a rate cut (the second of the year) to be announced by the central bank. Today, South Australia's leading business group has called on the RBA to cut rates to boost confidence throughout the economy. This will be the last meeting of the year for the RBA. The next meeting will be next February as the central bank never meets in January. The RBA typically meets on the first Tuesday of each new month.

On Wednesday, the latest quarterly reading on economic growth for Australia will be released. The market is currently expecting growth of 1.2 pct for the quarter (July to September).

On Thursday the latest employment report will be released which shows us how many jobs were created in November in addition to the nation's unemployment rate which has remained between 5.2 pct and 5.3 pct for a number of months.

On Friday, China will have one of its biggest days of the month in terms of economic data with the latest retail sales report in addition to the Consumer Price Index (CPI) reading issued. CPI measures the change in prices paid by Chinese consumers for a basket of goods over the previous quarter (July to September).

The volume of shares traded came in at 2.03 billion today, worth $4.57 billion. 542 shares were up, 455 finished weaker and 359 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is flat.

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 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 remain above parity against the greenback for the fifth straight day and buys US102.2 cents.

Steven Daghlian, Commsec Market Analyst

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