Australian Stock Market Report - Afternoon 12/09/2011

MARKET CLOSE (4.30pm AEDT)

It was yet another tough day for the Australian sharemarket with the All Ordinaries index (XAO) down 1.7 pct or 74.8 pts to 4264.1. There was weakness across the board today with the miners the biggest losers, down by more than 2 pct. Thanks to a positive start to trade on Monday, shares pulled back by only 1.87 pct this week.

The S&P/ASX 200 Financials index lost 1.9 pct or 77.8 pts to 4012.8. The four big banks all lost ground despite passing on the Reserve Bank's (RBA) rate cut in full. National Australia Bank (NAB) dropped 2.4 pct or 59 cents to $24.02, Westpac (WBC) fell 2.14 pct or 46 cents to $21.07, Commonwealth Bank of Australia (CBA) weakened by 1.69 pct or 84 cents to $48.84 and ANZ Banking Group (ANZ) lost 1.33 pct or 28 cents to $20.85.

The S&P/ASX 200 Materials index (a measure of stock performance in the mining sector) slumped by 2.44 pct or 279.3 pts to 11153 today with the two biggest stocks in the index, BHP Billiton (BHP) and RIO Tinto (RIO) the most significant contributors to the weakness. BHP lost 3.05 pct or $1.13 to $35.86 while the smaller RIO dropped 3.56 pct or $2.35 to $63.74.

Investment manager AMP Limited (AMP) could not hold on to its gains for the whole session and ended the day down 0.46 pct or 2 cents to $4.30 despite a Japanese financial institution announcing that it aims at taking a 15 pct stake in the company.

Next week in Australia a number of economic reports will be released. On Monday, the latest housing finance report is issued for October. This shows us how many new loans were created by the banks during the month. In the middle of the week, the latest report on consumer sentiment will be released. This will show us how Australians are feeling about their finances and the state of the broader economy.

In the region China had one of its biggest days of the month in terms of economic data. The much anticipated Consumer Price Index (CPI) was released today and came in lower than expected. This opens the door for further stimulus potentially.

Japan also released a number of economic readings throughout the day including the latest growth report which showed that the Japanese economy expanded by 1.4 pct.

In Europe tonight, the Economic Summit continues for its second day. This is the 15th meeting held by the European leaders in less than two years. Some of the commentary from the two day meeting has been less than promising so far. French President, Nicolas Sarkozy said that there is no 'second chance' if a deal to reduce European debt is not reached this weekend.

The French Minister for European Affairs, Jean Leonetti warned that the Euro could 'explode' and that there still remains every possibility that Europe could 'unravel'. As you might expect, the market tends to not react well to this sort of language.

Herman Van Rompuy, the European Council's President said today that the continent's leaders will commit to strong fiscal rules and 23 of the 27 Euro states will agree to a treaty. A deal including all 27 member nations is not looking likely at the moment however another day of meetings is still expected. The first day of meetings continued until around 3am (European time).

Germany tonight will release its trade balance (difference between exported and imported goods) in addition to its latest inflation (change in prices) reading.

In the U.S tonight, the latest report on the state of consumer confidence will be out in addition to the world's largest economy's trade balance.

The volume of shares traded came in at 1.96 billion today, worth $4.3 billion. 295 shares were up, 656 finished weaker and 361 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 2.19 pct or 94 pts to 4189.

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 lower, indicating that U.S stocks could start in the red 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 pulled back with the uncertainty in Europe impacting confidence in riskier assets. The AUD buys US101.1 cents.

Steven Daghlian, CommSec Market Analyst

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