Australian Stock Market Report – Afternoon 12/27/2012

MARKET CLOSE
(4.30pm AEDT)

After two days of rest, investors cautiously returned to their computers to place trades. It was around four times quieter than a typical session, as expected. The All Ordinaries Index (XAO) still rose by 0.3 per cent or 15.8 pts to 4661.4 making it the 11th session of gains in 13 trading days.

Investors tend to be extremely unmotivated in the final week of the month, with many global markets closed for a number of days which keeps volume light. It was a quiet night for global markets overnight, with the British and European markets shutting their doors to observe public holidays. Markets in Australia, Hong Kong and New Zealand were also closed.

Both the Republicans and Democrats continue to play games in relation to the fiscal cliff negotiations. An 11th hour deal is a possibility with just a few days remaining until around US$600 billion in tax rises and spending cuts are automatically triggered at the start of 2013 (unless the negotiation period manages to be extended). Taxes on income between US$35,000 and US$85,000 will increase by 3 per cent while higher income earners will also be hard hit. Income earned above $388,000 will be taxed at a rate almost 5 per cent higher than the current 35 per cent. The situation is much worse in France however, with the Socialist government increasing tax rates to ridiculous levels. Earnings of more than €1 million are taxed at over 75 per cent, which has resulted in some of France's top celebrities leaving their homeland and taking refuge in neighbouring countries. This includes Gerard Depardieu, Alain Delon and Christian Clavier, although both Mr Delon and Clavier have said they left not due to tax reasons.

Iron ore miner, Fortescue Metals (FMG) was one of the better performers of the day after announcing the resumption of its Kings Deposit development in Western Australia (Pilbara region). FMG said this is thanks to a recent improvement in iron ore prices and a better market outlook. FMG shares rose by 4.14 per cent or 18 cents to $4.53, taking the gains for the year to 6.09 per cent. This compares to a 13.4 per cent rise for the broader Aussie sharemarket.

The Australian National Retailers Association (ANRA) has forecast that sales nationally will top $1.8 billion over the holiday break, which is a 2.5 per cent rise on 2011. A strong rise in sales using credit cards on Boxing Day is also likely. Myer (MYR) shares rose by 2.9 per cent or 6 cents to $2.13 while the smaller David Jones (DJS) gained 2.99 per cent or 7 cents to $2.41.

The ANRA represents some of the country's biggest retailers, with its members employing over 450,000 people and earning around $100 billion in annual sales.

Australia's big four banks ended mixed, with National Australia Bank (NAB) the only major to edge higher. Commonwealth Bank (CBA) slipped by 0.34 per cent or 21 cents to $62.12 while Westpac (WBC) and ANZ Banking Group (ANZ) both fell by around 0.25 per cent.

Surfwear retailer Billabong (BBG) gained for the third straight session, with the group behind the $527 million bid for the struggling company conducting its due diligence. BBG shares closed 4.82 per cent or 4 cents higher to 87 cents.

The mining sector ended around 0.5 per cent higher, with BHP Billiton (BHP) up 0.35 per cent or 13 cents to $36.99 while Rio Tinto (RIO) rose by 0.94 per cent or 61 cents to $65.45. Australia's second biggest oil and gas producer, Woodside Petroleum (WPL) rose 0.65 per cent or 22 cents to $34.03.

No major economic news is due for release locally this week while the region is just as quiet with the exception of numerous economic reports in Japan on Friday. This will include inflation, household spending, industrial production, retail sales and unemployment data.

No major data is expected in Europe tonight while it will be the busiest session of the week in the U.S. A report on the number of new homes sold in November will be issued, along with consumer confidence and weekly unemployment claims.

Volume of shares traded came in at 851 billion today, worth just $1.32 billion. 488 shares were up, 300 were weaker and 327 ended unchanged.

At 4.30pm (AEDT) on the Sydney Futures Exchange, the ASX24 futures contract is up 0.09 per cent or 4 pts to 4632.

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, in particular the U.S dollar. One AUD buys US103.6 cents (around US2 cents weaker against the greenback than a fortnight ago), is trading at £64.2 pence and €78.2 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.

[Kick off your trading day with our newsletter]