Australian Stock Market Report – Afternoon 12/18/2012

MARKET CLOSE
(4.30pm AEDT)

After briefly losing its footing yesterday, the Australian sharemarket rose for the seventh time in eight sessions. The All Ordinaries Index (XAO) edged higher by 0.5 per cent or 22.5 pts to 4610.5. The energy sector and property trusts were the only losers today.

Global markets were mixed albeit mostly stronger overnight, with the Dow up 0.8 per cent, Germany's DAX index rose by 0.1 per cent while the French market slipped by 0.1 per cent.

A number of household names held Annual General Meetings (AGMs) with shareholders today. Of the better performing companies to meet with investors was paint maker, DuluxGroup (DLX). DLX said that sales are on the improve so far this year and it has been one of the quiet achievers since listing back in 2010. To put this into perspective, the XAO is up 12 per cent in 2012, whereas DLX is up by a much more impressive 29 per cent.

Troubled surfwear retailer remained in a trading halt as it received its fifth takeover offer of the year on Monday, worth around $555 million. BBG shares have fallen by 30 per cent this year, adding to a staggering 78 per cent pullback in 2011.

Australia's third largest iron ore miner, Fortescue Metals (FMG) jumped by 2.91 per cent or 13 cents to $4.60 and continues its fantastic run. FMG sold off its 25 per cent interest in an iron ore joint venture, worth around $190 million. FMG shares are up 17 per cent in December

The miners contributed most to the gains, with Rio Tinto (RIO) rising by 1.86 per cent or $1.18 to $64.70 while the larger BHP Billiton (BHP) jumped 0.85 per cent or 31 cents to $36.66.

Three of the four major banks will be paying out billions of dollars in dividends this week, however all four improved. National Australia Bank (NAB) was the standout after rising 0.49 per cent or 12 cents to $24.60 while the other majors edged higher by as much as 0.25 per cent.

On the economic front, June quarter demographic statistics were issued and showed that migration is continuing to drive overall population growth. The country's population rose by 359,600 last financial year and now sits at 22,683,600. A substantial 297,000 babies were born over the year, which makes it a record high. Migration has now increased for the fifth straight year. Per capita, there were around 30 per cent fewer babies born in Germany than in Australia last year.

CommSec Economist, Savanth Sebastian said that "Some people aren't convinced that faster population growth is a good thing. It is all about striking the right balance. If we need more workers and we can't get them locally, it makes sense that we bring them in from abroad. It is vital that supply and demand for workers is brought into balance. The lift in migration is also positive from a longer-run point of view in that it flattens out the ageing profile. We will need more in the way of younger people over time to support the growing ranks of pensioners."

The Reserve Bank board minutes today suggest that the decision to cut rates for the fourth time this year in December was largely due to weak job numbers.

Mr Sebastian said that "Looking forward the Reserve Bank is certainly faced with a patchy landscape. Mining investment is set to peak in the near-term, however the short-term outlook for the non-resource investment remains weak. In addition the higher Aussie currency is having a detrimental impact on exports while the anticipated slowing in labour demand
was also likely to dampen activity. As such it is likely that the Reserve Bank will continue to maintain an easing bias. CommSec is still pencilling in another quarter of a per cent rate cut in February"

Tonight in Europe, the latest inflation data will be issued in the U.K and is expected to show a modest 2.6 per cent rise in prices for the year. In the U.S, data on house prices will be released.

Volume of shares traded came in at 1.77 billion today, worth just $4.99 billion. 536 shares were up, 434 were weaker and 352 ended unchanged.

At 4.30pm (AEDT) on the Sydney Futures Exchange, the ASX24 futures contract is up 0.63 per cent or 29 pts to 4602.

Due to the end of daylight savings in Europe, most major European markets are now trading between 7pm (AEDT) and 3.30am (AEDT). Futures are currently pointing to a mixed start to trade tonight.

U.S futures are also pointing to a slightly better open tonight. Due to the start of daylight savings in Australia and its end in the U.S, American markets will now be trading between 1.30am (AEDT) and 8am (AEDT).

Turning to currencies, the Australian dollar (AUD) has lost ground against a basket of currencies overnight. One AUD buys US105.3 cents, is trading at £64.9 pence and €79.9 cents.

Australia is a commodity based economy, with commodities in general accounting for almost 80 pct of all our exports over the past nine months. In essence, when the going gets tough globally, there is fear of less demand for our commodities, which tends to result in a weaker AUD.

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