Australian Stock Market Report – Afternoon 1/23/2013

Afternoon Market Report
(17:00 AEDT)

Midweek has come and gone for the Australian sharemarket and consolidation remains the dominant theme for local investors. At face value the small improvement for the index appears unimpressive, although the increaseD volume points to investor willingness to support the market at higher levels.

The S&P/ASX200 ended the session with a gain of 0.18% to close at 4,787.8. The broader measure of the market the All Ordinaries, gained 0.19% to 4,812.1. In turnover, 1.6 billion shares worth almost $4.4bln change hands today, a respectable outcome. 484 stocks ended higher, 463 were lower and 346 closed unchanged.

The improving volumes, at face value, appeared to be supporting the mining energy and financial sectors which were the best improved groups on the day.
BHP the stood out with its 1.3% gain, or 48 cent improvement to $37.06 cents. Whilst there were few revelations in its quarterly production report (see update on commsec TV), the production figures underscored improving volumes which will be supportive of the share price in the near term.

Some of the highlights incuded;Iron ore output setting new production records. Volume increased 6% compared to the September quarter. Iron ore shipments from Pilbara set a new record rising by 6% against the earlier record which was set in the June 2012 quarter. Petroleum production, derived from shale and output in the Gulf of Mexico grew strongly. Coal output in QLD is recovering although it remains well below the highs of two years ago. BHP is expecting a drop in the cost of coal production the second half of the year.

As we approach the upcoming earnings season we enter the 'confession' period of company communication. Nufarm made their contribution today saying that the interim result for its Australia and New Zealand division will be materially down compared to last year.The pesticide maker said that New South Wales and Queensland had been hurt by unusually hot and dry conditions for much of the key August to January period crimping sales. This impacted in a number of markets including higher value segments such as cotton, horticulture and other summer crops. However, the lower Australian earnings will be ballanced by a better performance from the international operations. Nufarm forecast growth of at least 15 per cent in its underlying first half profit, compared to the same time last year. Nufarm shares ended at $5.75 lower by 58 cents or more than 9%

Fourth quarter inflation figures were released today,the feature of the week in economic terms. The Consumer Price Index which is the the main measure of inflation in Australia rose by 0.2 per cent in the December quarter, well below expectations for a lift of around 0.4 per cent. Consumer prices stand 2.2 per cent higher than a year ago. The latest data keeps the door open to a rate cut in the event that the economy requires more help from lower rates. Financial markets see a 36 per cent chance of a rate cut. CommSec believes that the Reserve Bank will leave interest rates unchanged in February. Additionaly producer price data which will be released in early February will probably confirm that businesses continue to absorb costs, passing on the savings to consumers in an effort to promote spending. Given the strength of the aussie dollar, inflation is unlikely to be an issue over the coming year.

One of the features of the overnight session will be IMF providing its latest World Economic Outlook . We expect the report to continue to emphasise the downside risks to global growth. The likelihood is there is no change to the IMF's 3.6% estimate for 2013 global growth. Such headlines may cause some intra-day volatility, but typically do not alter our views on currency direction.

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