Australian Stock Market Report – Afternoon 12/3/2012

AFTERNOON MARKET REPORT
(17:30 AEDT)

Not for the first time, Monday bore witness to one of those perverse circumstances where stocks rise in response to weaker economic news. The last week in the US was defined by a lack of progress in relation to the fiscal cliff, although Republicans and Democrats expressed confidence that the matter would be resolved in a timely fashion. Weekend developments in Washington saw an opening gambit being made by the Democrats, which was summarily dismissed by the Republicans. 'The game' has begun; it's now a question of its resolution. The week ahead will see investors focussed on US political headlines whilst monitoring the tier 1 economic releases to gauge the extent which political uncertainty has impacted real world outcomes.

The ASX200 closed 25 points or 0.57% higher at 4,531, the All Ordinaries gained 22 points or 0.49% to 4,540.0.

The theme of the day locally was the firming of odds for an RBA rate cut on Tuesday in the wake of Retail Sales and ANZ Job Ads figures which in both cases were weaker than expected. The number of job advertisements appearing on the internet and in newspapers fell 2.9% in November, following a decline of 4.6% in October. This was the eighth consecutive monthly decline. The total number of job advertisements in November was the lowest since January 2010. Job advertisements are now 17% below levels seen in November last year. In trend terms, job advertisements declined 2.5% m/m in November. The case for rate cuts has been informed by job ads remaining soft without a demonstrable improvement in hiring outside the mining sector. Additionally, the outlook for mining investment has continued to soften in the face of the uncertain outlook for the bigger picture. As a consequence there is now a greater need for a pickup in activity outside the mining sector. Materials and Utilities were the only 2 sectors measured by the ASX which didn't gain ground. Mining stocks were impervious to the news that Chinese manufacturing activity had improved over the last month. The Chinese Purchasing Managers (PMI), produced by HSBC rose to 50.5 in November from 49.5 in October. The measure rose for the first in 13 months. Rio Tinto (RIO) settled at $58.54 down 21 cents or 0.35%, BHP Billiton (BHP) closed at $34.54 up 15 cents or 0.44%, Fortescue Metals Group (FMG) ended trade at $3.76, a loss of -15 cents or -3.8% .

Banks provided the cornerstone for the day's gains driven by the belief that rates will be lower at this time tomorrow. ANZ closed at $24.69 up 33 cents or 1.3%, CBA settled at $60.81 a gain of $1.12 or 1.8%, NAB was the only one of the big for to end the session lower at $24.29 a loss of 1 cent or 0.04%. WBC finished the day at $25.56 up 6 cents or 0.24%.

Whilst some measures have been improving, momentum outside of the mining sector is unconvincing, witness todays retail sales report for October. Retail trade was flat in October after rising by 0.5 per cent in September and 0.3 per cent in August. Annual spending growth fell from 3.5 per cent to 3.1 per cent. Non-food retailing fell by 0.7 per cent in October after a 0.4 per cent lift in September. Sales by chain-store retailers and other large retailers were flat in October after a rise of 0.2 per cent in September. Sales by chain-store retailers and other large retailers were up 4.4 per cent on a year ago. Woolworths (WOW) closed at $29.43, a gain of 15 cents or 0.51%, Wesfarmers (WES) ended trade at $35.95, an improvement of 40 cents or 1.1%, Harvey Norman (HVN) settled at $1.79 a loss of 1.5 cents or 0.83%. David Jones (DJS) last traded at $2.44 ending 5 cents down or a 2% deficit.

One of the main economic releases in offshore trade tonightwill be The US Institute of Supply Management releasing its measure of activity in the manufacturing sector for November.The risk is for the reading come in below expectations of 51.5 points due to the lower levels of actvity in the aftermath of the recent storms.

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