Australian Stock Market Report - Afternoon 12/15/2011

MARKET CLOSE (4.30pm AEDT)

The Australian sharemarket lost ground for the second time this week with the All Ordinaries index (XAO) ending the day 1.2 pct or 52 pts lower to 4197.8. Today's falls have wiped out almost all of the gains recorded so far this month. In fact since the start of the month, shares have only edged higher by an unimpressive 0.3 pct.

Over the previous two Decembers shares locally have improved by around 3.5 pct. This time around, the uncertainty in Europe has been weighing heavily on investors' minds. The last week of the month will be a shortened one due to the Christmas break.

Almost all sectors lost ground today, with the miners and energy players once again the biggest drag on trade. The S&P/ASX 200 Materials index fell 2.29 pct or 251.9 pts to 10766.6. Australia's second largest miner, RIO Tinto (RIO) slumped 2.79 pct or $1.76 to $61.40 while the larger BHP Billiton (BHP) dropped by 1.79 pct or 64 cents to $35.06.

The S&P/ASX 200 Financials index (a measure of stock performance in the financial sector) lost 0.96 pct or 38.7 pts to 3972.1. The big four all ended lower, with Westpac (WBC) down 1.63 pct or 34 cents to $20.46, National Australia Bank (NAB) fell 1.59 pct or 38 cents to $23.48, Commonwealth Bank of Australia (CBA) plummeted 1.52 pct or 75 cents to $48.63 while ANZ Banking Group (ANZ) lost 0.91 pct or 19 cents to $20.78. NAB was the second major bank this week to hold its Annual General Meeting (AGM) with shareholders.

On the rural front, grain markets fell sharply last night. The price of wheat slumped by 3.3 pct taking the losses in U.S dollar terms to 14 pct over the past 3 months. The world's largest market for wheat is the Chicago Board of Trade in the U.S.

The retailers were mixed today. David Jones (DJS) rose by 2.6 pct or 7 cents to $2.76 while its competitor Myer (MYR) slumped by 3.33 pct or 8 cents to $2.32. Menswear clothing retailer, Fletcher Jones will be closing three of its stores immediately and is losing 61 of its staff with administrators trying to keep the business alive. There are 15 stores expected to close their doors over their next few days and will keep the remaining 30 stores open for the time being.

Uranium miner, Paladin Energy (PDN) is now expected to start exploring its assets in Canada after a three-year ban from mining on indigenous lands was lifted. PDN shares still fell by 0.95 pct or 1.5 cents to $1.57 taking the losses for the year to 68 pct. The uranium miners have been hit hard since March this year following the Japanese earthquake and tsunami which almost triggered a nuclear meltdown in the world's third largest economy.

NSW had its long term credit rating upgraded from AA+ to AAA today by ratings agency, Fitch. The French based company said that the state's stable and diversified economy and its effective management of finances were some of the key reasons for the upgrade.

On the economic front today, we found out how many cars were sold across the country last month. The numbers made it clear that Australians are still remaining conservative with their savings. The number of new cars sold fell by 0.7 pct however Sports Utility Vehicles (SUVs) are becoming increasingly popular. Over the past 12 months there have been over 240,000 SUVs sold, which is the highest reading in records going back 17 years.

Commsec Economist Savanth Sebastian provided some insight into the popularity of SUVs saying that "It seems that Australia's love affair with four-wheel drive vehicles (4WD) is far from over, with sales hitting record highs over the past year. In fact on in every three passenger vehicles sold in the 12 months to November was a 4WD or sports utility vehicle. And while you may be noticing more SUV's on the suburban roads it is clear that the mining boom and resulting strength in regional mining town is also supporting the demand for all terrain vehicles."

In Asia today, both China and Japan issued reports on the state of their manufacturing sectors. Japan's manufacturing sector is doing worse than expected however there was a slight improvement in China's manufacturing space. All markets throughout the region lost ground today with shares in Japan down more than 1.5 pct and South Korea's KOSPI lost a touch over 2 pct.

In Europe tonight, the latest manufacturing report will be issued for both France and Germany. The European Central Bank (ECB) will be releasing its monthly bulletin. It reveals the statistical data that the ECB Governing Board evaluated when making the latest interest rate decision. The bulletin also provides detailed analysis of current and future economic conditions from the central bank's perspective. In the U.K, the monthly report on the state of the its retail sector will be issued and is expected to remain subdued.

In the U.S, the weekly report for the number of Americans filing for unemployment benefits will be issued. A reading below 390,000 will be ideal.

The volume of shares traded came in at 2.2 billion today, worth $6.3 billion. 285 shares were up, 692 finished weaker and 354 ended unchanged. The expiry of index futures has resulted in more stock exchanging hands than would otherwise have been the case.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 1.15 pct or 48 pts to 4116

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 lower, indicating that U.S stocks could start a touch weaker 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 US98.7 cents and is trading at its lowest level since the end of November.

Steven Daghlian, CommSec Market Analyst

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