Australian Stock Market Report – Afternoon 12/28/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket continued on its strong run, rising for the third straight session and for the 12th time in 14 trading days. Local equities are still at 18-month highs. Global market ended mixed overnight, with the Dow easing by 0.1 per cent, Germany's DAX edged higher by 0.3 per cent while France's CAC40 jumped by 0.6 per cent. The All Ordinaries Index (XAO) rose by 0.5 per cent or 23.9 pts to 4685.3.

Bickering, Facebook posts, tweets and speculation were rampant last night and dictated the direction of U.S equity markets. At its low point, the Dow was down by 1.1 per cent and was 0.2 per cent higher at its best.

Firstly, Democrat Harry Reid voiced his concerns that a fiscal cliff agreement in 2012 was very unlikely. This resulted in the market plummeting. Secondly, Republican Senator Scott Brown said that President Obama had reached out to the Senate with a proposal in a Facebook post. This resulted in a brief comeback for less an hour. It was short lived as the Chief Washington Correspondent for CNBC; John Harwood said the messages were untrue (in a tweet). This then resulted in yet another pullback. Who would have thought 10 years ago that social media would have the power to determine the direction of markets?

The mining sector was the standout performer today, with the S&P/ASX 200 Materials index up 1.04 per cent. BHP Billiton (BHP), Australia's biggest company and mining business rose by 1.11 per cent or 41 cents to $37.40 while the smaller Rio Tinto (RIO) jumped by 1.65 per cent or $1.08 to $66.53.

Iron ore miner, Fortescue Metals (FMG) gained by 2.43 per cent or 11 cents to $4.64, making it two straight sessions of improvements. Yesterday, FMG shares rose 4.14 per cent after announcing the resumption of its Kings Deposit development in Western Australia, citing the recent improvement in ore prices and a better market outlook as the main reasons. FMG shares are still lagging behind the rest of the market however, with FMG up 8.67 per cent, while the XAO is up 14 per cent.

The big four banks edged a little higher with Westpac (WBC) the best of the majors after rising by 0.65 per cent or 17 cents to $26.27.

Australia's biggest telecommunications company, Telstra (TLS) had a mixed session and flirted with positive and negative territory for much of the day. TLS has been one of the standouts this year, with its share price up 31 per cent this calendar year. TLS today slipped by 0.23 per cent or 1 cent to $4.39.

No major data was issued in Australia today, however a number of reports were released in Japan earlier in the day. Today was one of the busier sessions for economic news in Japan, the world's third biggest economy behind the U.S and China. Its manufacturing sector continues to contract, household spending rose by a less than expected 0.2 per cent, industrial production was worse than forecast while inflation remains non-existent. The unemployment rate in Japan improved modestly from 4.2 per cent to 4.1 per cent while retail spending jumped by a slightly better than expected 1.3 per cent.

In Europe tonight, French consumer spending for the previous month will be out at 6.45pm (AEDT) and is expected to be unchanged. A 10-year Italian bond auction will also be held.

In the U.S tonight, pending home sales data will be issued at 2am (AEDT) and is expected to show a modest monthly contraction of 0.3 per cent. At 3am (AEDT), weekly crude oil inventories will be issued.

Looking ahead, the Australian market will close two hours earlier than usual on Monday. Shortened sessions in Hong Kong and the U.K will also be observed. The South Korean and Japanese markets will shut on New Year's Eve.

2012 certainly has been an eventful year, with no shortage of problems hitting markets around the world. President Obama was voted in for a second term, the European debt crisis continued, the fiscal cliff has dominated much of the attention over the past few months, Chinese leaders achieved a soft landing and the Reserve Bank cut the cash rate by 1.25 per cent to 3 per cent.

Volume of shares traded came in at 940 million today, worth just $1.71 billion. 491 shares were up, 323 were weaker and 338 ended unchanged.

At 4.30pm (AEDT) on the Sydney Futures Exchange, the ASX24 futures contract is up 0.06 per cent or 3 pts to 4649.

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 mostly stronger start to trade tonight.

U.S futures are pointing to a flat 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) gained some ground against a basket of currencies throughout the day. One AUD buys US103.8 cents, is trading at £64.4 pence and €78.3 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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