Australian Stock Market Report – Afternoon 12/14/2012

Afternoon Market Report
(17:30)

John Boehner, the Republican Speaker of the US house of Representatives, addressed the media in Washington in US time last night. Not for the first time he said President Obama was not committed to making serious spending cuts and as a consequence the US economy will go over the fiscal cliff. With 18 days left in which to strike a deal, the language still being used in public exchanges between the two parties is less than inspiring. Global markets have recognised the latest salvo as being more of the same from US politicians. Winston Churchill famously said that 'you can rely on Americans to do the right thing once all other avenues have been exhausted'. Lets hope that there are fewer avenues to explore than there are ays left in the year.

There was nothing particularly sinister or hope giving in the price movements of the last day, either in local or international terms. Helping the tone of regional markets today was the private measure of Chinese manufacturing activity, which was stronger than expected in the last month. The HSBC China PMI rose from 50.5 to 50.9 adding to the belief that the Chinese economy continues to consolidate.

The ASX200 index lifted 0.01% to 4583.1 points, The All Ordinaries index rose 0.05 per cent to 4595.1 points. 1.5 billion Shares were traded valued $3.8 billion. 449 stocks finished higher, 447 ended down and 361 were unchanged.

The better manufacturing data from China added support to the mining sector which has been improving this week as investors switch out of defensive sectors into cyclical BHP Billiton rose 0.19% to $36.07, Rio Tinto gained 0.4% to $63.00. Fortescue Metals Group moved ahead 1.4% to $4.31.

Energy stocks underperformed as a group following gains earlier in the week. Caltex said that increased production at its Kurnell and Lytton refineries will pave the way for a full year net profit after tax in a range between $145 million and $165 million. Last year, Caltex posted a loss of $852 million for the year due write-downs in its refinery business. Caltex shares finished at $19.20 up 1.4%.

Engineering and Construction Company Clough raised earnings forecasts, on the back of new contracts and strong trading conditions. In the same space McMahon Holdings experienced the opposite fortune. The engineering and contract mining group fell following an $80.7 million capital raising, the sale of its construction business to Leighton Holdings for $16.3 million and a profit downgrade. The group said its net profit for 2012/13 would be in the range of flat to $25 million with the company being forced to make substantial write-downs in relation to its construction business. Clough shares finished at 92 cents a gain of 3.4%. McMahon closed at 21.5 cents a loss of -3.6%

The financial the sector moved higher with limited conviction. Insurance Australia Group said that following the completion of a strategic review it will be selling its UK operations to private equity group Aquiline Capital Partners for $A130 million. IAG shares closed at $4.72 down 1.8%.

Elsewhere, Australand rejected GPT´s offer to buy its investment, commercial and industrial property portfolios. Australand said it would not consider discussions with GPT which made its opening offer a week ago. Australand made a statement saying that its board, together with its advisers, has carefully considered the proposal and has determined that the proposal does not provide a compelling value proposition and is not in the best interests of Australind's security holders, the GPT offer does not provide a sufficient premium or compensation to security holders for the transaction costs that would be incurred by Australind.

The offer price made by GPT is a $140 million premium to the book value of the businesses. Shares in GPT closed at $3.56 down 4 cents or 1%. Australand stock closed at $3.3 up 11 cents or 3.4%

Shares in APN News & Media fell more than 15% after it issued a profit warning after the market closed on Thursday. APN said its publishing revenue had slumped 10 per cent since June, and that it now expects its annual net profit before exceptional items to drop to between $51 million and $54 million. Earnings before interest, tax, depreciation amortisation (EBITDA) is expected to drop 28 per cent in the full year. The profit downgrade comes on the heels of $25 million in cost cuts which have balanced a fall in revenues. APN expects its total EBITDA, before exceptional items, to fall to between $150 million and $155 million. APN shares closed at 26.5 cents for a loss of 5 cents or 15.8%

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