Australian Stock Market Report - Afternoon 12/14/2011

MARKET CLOSE (4.30pm AEDT)

The Australian sharemarket certainly could not put 'consistency' down on its resume as one of its strong points. Over the past 20 business days, local shares have improved exactly half of the time and have gained by an uninspiring 2.5 pct over the past three months.

Today, the Australian sharemarket ended flat after falling by 1.4 pct yesterday and improving by approximately 1 pct on Monday. Activity remained on the light side once again with only around $4 billion worth of trades exchanging hands throughout the day.

The S&P/ASX 200 Financials index edged higher by 0.07 pct or 3 pts to 4010.8 with ANZ Banking Group (ANZ) rising 1.11 pct or 23 cents to $20.97. National Australia Bank (NAB) gained 0.46 pct or 11 cents to $23.86 and Commonwealth Bank of Australia (CBA) ended only 0.06 pct or 3 cents higher to $49.38.

Westpac (WBC) held its Annual General Meeting (AGM) with shareholders today. The major bank's Chief Executive, Gail Kelly said that there had been good growth in customer deposits but warned that if conditions in Europe worsen, you would expect this to directly affect the price and availability of credit. WBC was the only major bank to lose ground today and eased by 0.14 pct or 3 cents to $20.80.

Australia's second largest airline, Virgin Australia (VAH) was higher for most of the session only to end flat by close of business to 33.5 cents. As part of its alliance with Singapore Airlines, a new service was announced between Darwin and Singapore starting from March next year. Virgin Australia has recently changed its ticker code (ASX code) from VBA to VAH and from Virgin Blue to Virgin Australia.

James Packer has said he plans on re-naming Burswood Casino in Western Australia to Crown Perth. The name change has the intention of attracting more tourists from the Asia Pacific region. Crown (CWN) shares rose 1.12 pct or 9 cents to $8.15. Mr Packer currently owns close to half of CWN.

In the Asian region you would be hard pressed to find a company that has performed almost as badly as Tokyo Electric, the owner of the Fukushima Daiichi power plant in Japan. However troubled camera company, Olympus is not in a much better situation. It has been fighting to not be removed from the Tokyo Stock Exchange (TSE) due to the cover up of its spending and profits for a number of years. Its shares have almost halved in value since the start of 2011.

On the economic front today, a report has shown that Australians believe the best place to park their money is in the bank. Around 26 pct of people consider paying down their debts as the wisest thing to do with their savings. This is one of the highest savings rates in around 14 years. While paying off debt does sound sensible it tends to have a negative impact on different areas of the economy such as the retail space. The report has also shown that Australians are around 8 pct less confident with the state of their finances and the broader economy now than at this time last month.

At around midday Reserve Bank Deputy Governor, Ric Battellino spoke at the 24th Australasian Finance & Banking Conference in Sydney. As expected he expressed his concerns with the growing financial problems in Europe and said that the Eurozone has become the main threat facing the global economy.

In his speech Mr Battellino said that "it is hard to tell how and when the (European) problems will be resolved" and that "...given the size of the European economy and financial system, it will be hard to avoid adverse consequences for other parts of the world."

Commsec Economist, Savanth Sebastian commented on the worse than expected consumer sentiment report by saying that "The latest slide in consumer confidence is certainly concerning - especially given the latest survey was done predominately after the second round of interest rate cuts in early December. The global economic troubles having been dominating news headlines and it does seem to have substantially altered consumer perceptions. The ongoing volatility in the share market and sovereign debt concerns are making consumer decidedly more pessimistic about the midterm outlook. In fact consumer sentiment is now down almost 15 per cent on a year ago."

There were a few minor pieces of economic data released in the Asian region today including the most recent report on industrial production.

In Europe, we will find out the U.K's latest unemployment rate tonight. The jobless rate is expected to remain at around 8.3 pct. The state of the jobs market offshore has been of significant concern for most advanced economies.

No major data is scheduled for release in the U.S tonight.

The volume of shares traded came in at 1.9 billion today, worth $4.01 billion. 428 shares were up, 520 finished weaker and 371 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 0.14 pct or 6 pts to 4178.

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 weaker start to trade.

Dow Jones futures are currently higher, indicating that U.S stocks could start a touch higher 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) buys US100.1 cents and has been flirting with parity against the greenback (the U.S dollar) for the majority of the session. The AUD actually hit around US99.8 cents earlier in the day for the first time this month only to improve in the afternoon.

Steven Daghlian, CommSec Market Analyst

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