Australian Stock Market Report - Afternoon 1/23/2012

MARKET CLOSE (4.30pm AEDT)

After three straight weeks of gains, the Australian sharemarket has kicked off the new trading week in the red. The All Ordinaries index (XAO) fell by 0.4 pct or 15.4 pts to 4287.6. The industrial and utility sectors managed to rise slightly but all other regions of the market ended the day in the red.

The largest listed company on the Australian sharemarket, BHP Billiton (BHP) fell 0.64 pct or 24 cents to $37.24 while the smaller RIO Tinto (RIO) managed to improve by 0.53 pct or 36 cents to $67.89. The country's biggest gold producer, Newcrest Mining (NCM) lost 0.74 pct or 24 cents to $32.20 while the second largest oil and gas producer, Woodside Petroleum (WPL) fell 0.85 pct or 29 cents to $33.70.

The big four banks were mixed for much of the session but all finished a touch lower by market close. Westpac (WBC) was the worst performer of the day and lost 1.06 pct or 22 cents to $20.46. Commonwealth Bank (CBA) eased by 0.18 pct or 9 cents to $49.74, National Bank (NAB) fell 0.13 pct or 3 cents to $23.85 and ANZ Banking Group (ANZ) dropped 0.1 pct or 2 cents to $20.87.

A ranking of the world's largest banks (by market capitalisation) has shown that all four of Australia's big banks are ranked in the top 22 largest banks in the world. CBA ranks as number 10, WBC is 15th largest, ANZ is 20th and NAB is the 22nd largest bank in the world. This is quite an amazing result considering the size of the Australian population. Five of the world's top 22 banks are from the U.S, four from China, four from Australia, three from Canada and two are from Brazil.

Australia's largest airline, Qantas (QAN) rose by 2.94 pct or 4.5 cents to $1.57 after Fair Work Australia made a final determination on employment terms for approximately 1,600 aircraft engineers which will stay in place until 2014. QAN head, Alan Joyce said that "After such a damaging industrial campaign by the licensed aircraft maintenance engineers' union last year, it is a relief that this issue has finally drawn to a close."

On the economic front today, the latest Producer Price Index (PPI) rose by a less than expected 0.3 pct in the December quarter (October to December 2011). Commsec Economist Savanth Sebastian said that "In the current environment - with consumers closely watching their pennies - it's more likely that businesses would seek to absorb higher costs rather than passing them through to final buyers. And at face value it appears that businesses are absorbing higher raw material prices. In fact it is not just the retailers that are discounting but an array of service orientated sectors including real estate agents, car rentals, and management consultancy firms. It is clear that the lack of activity in the economy is resulting in businesses reducing margins to entice consumers."

The Australian Institute of Petroleum (AIP) released its latest weekly report on petrol prices which rose by 0.6 cents to 144.0 cents a litre last week (the national average Australian price of unleaded petrol). Mr Sebastian said that "CommSec expects the retail petrol price (pump price) to be largely flat over the next fortnight."

In Asia today, troubled camera company Olympus rose by over 7 pct today on the Tokyo Stock Exchange (TSE) after the bourse decided to keep the company listed for the time being. Throughout the region today China, Hong Kong, Indonesia, Singapore, South Korea, Taiwan and Vietnam were all closed for the Lunar New Year celebrations.

Tomorrow markets in China, Malaysia, Singapore, South Korea, Taiwan and Vietnam will be closed for business. On the economic front, Japan's latest monetary policy statement will be issued in addition to the world's third largest economy's rates decision. Rates will likely remain steady and no major changes are expected to be announced by the Bank of Japan (Japan's equivalent of Australia's Reserve Bank).

No major economic data is scheduled for release tonight in Europe; however Eurozone Finance Ministers are expected to kick off a two day meeting tonight in Brussels.

No major economic data will be released in the U.S tonight however the earnings season continues with Texas Instruments and Haliburton both posting their profit results. Haliburton is listed on the NYSE (New York Stock Exchange) with a code of HAL and is the world's second largest oilfield services company and employs approximately 52,000 people.

In the middle of the week, the World Economic Forum will kick off in Switzerland. This forum brings together around 2500 leaders to discuss financial problems and other issues such as on the environment and health. Central bankers, Prime Ministers, and business leaders from over 90 countries will all be meeting.

Greek officials continue to negotiate a deal with private holders of government bonds (debt). This is important because Greece still needs to receive additional bailout funds from the International Monetary Fund (IMF) and the European Union (EU).

The volume of shares traded came in at just 1.32 billion today, worth $3.04 billion. 454 shares were up, 503 finished weaker and 353 ended unchanged.
At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is up 0.05 pct or 2 pts to 4194.

Due to daylight savings, most major European markets are now trading between 7pm (AEDT) and 3.30am (AEDT).

Dow Futures are currently lower; indicating that U.S stocks are could open a touch weaker tonight. American markets open at 1.30am (AEDT). Due to the Americans going back an hour on November 5 last year, U.S markets will be trading between 1.30am (AEDT) and 8am (AEDT).

Turning to currencies, the Australian dollar (AUD) buys US104.8 cents and €81.3 cents. The AUD is currently trading at £67.4 pence.

Steven Daghlian, CommSec Market Analyst

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