Australian Stock Market Report - Afternoon 12/20/2011

AFTERNOON REPORT (4.30pm AEDT)

Local stocks closed modestly lower today, which was a fairly encouraging outcome given falls in offshore markets and a warning from the European Central Bank that 2012 would be another tough one for the global financial sector. Once again, volumes were low as investors decide to stay out of the market in the lead up to the end of the calendar year. The All Ordinaries Index (XAO) fell 7pts by close to 4107.

Most Asian stock markets were modestly higher, amid scattered deal-making and receding worries that the death of North Korean leader Kim Jong Il might spur instability on the Korean Peninsula. South Korea's KOSPI Index, which was heavily sold off yesterday, was up around 1pct in late trade.

The financial and materials sectors both ended in the red, which took the shone off gains made elsewhere in the telco, energy and health care spaces.

Hearing implant maker Cochlear (COH) shot up 16.4pct to $64.33 after announcing to the market that it's identified the cause of the default in one of its devices which caused a voluntary recall of the product earlier this year.

Other big winners included agribusiness Elders (ELD) and mining contract company MacMahon Holdings (MAH) on profit upgrades. ELD rose 6.5pct $0.245 after telling shareholders at the company's AGM its performance has improved. MAH added 4.6pct to $0.57 after tipping a 2012 profit of more than $55 million, up $10 million from previous estimates.

Meanwhile retail stocks were mixed. Surf-wear retailer Billabong (BBG) shed a further 12.8pct to $1.77 after sliding 44pct yesterday on a profit warning, however JB Hi-Fi (JBH) which delivered a similar warning last week, rebounded today, adding 1.7pct to $12.

Gloucester Coal (GCL) was placed in a trading halt today, pending a major announcement. It's believed GCL may merge with China's Yanzhou Coal to create a coal giant worth up $8 billion. Gloucester Coal has requested the trading halt until Thursday and closed yesterday at $7.03.

Minutes from the Reserve Bank Board's Decemebr 6 meeting were released today, confirming that policymakers were concerned about the strength of the global economy when they cut rates earlier this month. Given that inflation was well contained the Reserve Bank felt it was best to take out some added insurance against the global economic backdrop by cutting interest rates for a second consecutive month.

Meanwhile, the Commonwealth Bank Business Sales Indicator (BSI) rose by 0.3 per cent in trend terms in November after similar gains in October and September. There was continued encouragement at a sectoral level with just four of the 20 industry sectors contracting in trend terms in November, down from five sectors in October.

The Australian dollar ended the day's trade at US99.4c, £0.6404 and €76.42c.

On the market overall, a total of 1.6 billion shares were traded, worth $3.67 billion. 400 shares were up, 572 were down and 389 were unchanged.

At 4.30pm AEDT on the ASX24, the futures contract was at 4030, down 17pts.

Ahead tonight, housing starts and building permits are released in the US.

Juliette Saly, CommSec Analyst

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