Australian Stock Market Report - Afternoon 1/27/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket managed to improve for the second time this week and for the fourth consecutive week. Shares have improved by around 5.5 pct so far in 2012. This is a much better start to the year than back in 2011 when shares ended flat in January. The All Ordinaries index (XAO) rose by 0.4 pct or 19.4 pts to 4348.5.

Commodity prices gained very strongly overnight thanks to a weaker greenback (U.S dollar) which made commodities more attractive. The price of gold is sitting at around US$1717 an ounce which is a seven week high. If you bought gold around four years ago, you could have almost doubled your money by now (in U.S dollar terms). Australia's second largest miner, RIO Tinto (RIO) rose 2.09 pct or $1.43 to $69.78 while the larger BHP Billiton (BHP) edged higher by 0.64 pct or 24 cents to $37.66 and is getting closer to the evasive $38.00 level. As a side note, all commodity prices (oil, gold and base metals) are denominated in U.S dollars.

The financials were higher for much of the day, however eased towards the close with both ANZ Banking Group (ANZ) and Commonwealth Bank of Australia (CBA) ending the day in the black. ANZ edged higher by 0.37 pct or 8 cents to $21.50 while CBA rose 0.31 pct or 16 cents to $51.16. National Australia Bank (NAB) fell 0.5 pct or 12 cents to $24.08 while Westpac (WBC) ended largely flat.

Medical equipment maker, Resmed (RMD) gained 7.48 pct or 19 cents to $2.73 after recording a better than expected profit result in the last three months of last year. Profit dropped a touch for the first half of this financial year (July to December 2011) to US$113.4 million. RMD makes up around 10 pct of the healthcare sector and has helped the sector end a little higher today.

The Lunar New Year holidays continued today with markets in China, Vietnam and Taiwan all closed today. New Zealand posted a much better than expected trade surplus in December last year with dairy sales adding to the exports. Japan released its latest Consumer Price Index (CPI) which has shown that inflation is not a concern in the world's third largest economy (behind just the U.S and China).

In Europe last night, Germany's latest consumer confidence report has shown that the average German is feeling a little better with the state of both their finances and the economy than at the end of last month. The World Economic Forum (WEF) continued last night, with world leaders meeting in the Swiss Alps.

No major economic data is scheduled for release in Europe tonight however the WEF will continue.

In the U.S last night, the number of Americans filing to receive unemployment benefits for the first time last week was higher than expected, the number of new homes sold in December was lower than forecast however the number of orders made for durable goods (big ticket items) jumped by 3 pct in December.

Tonight will be an important session in the U.S as the latest quarterly (October to December 2011) growth reading will be released at 12.30am (AEDT) and could drive U.S trade if it surprises. The market is expecting 3 pct growth. The latest consumer sentiment reading will also be issued and is forecast to come in at 74.2. Any number above 50.0 indicates confidence.

On the earnings front tonight oil giant, Chevron (CVX;us) and consumer goods manufacturer Proctor & Gamble will also announce profit for the previous quarter. Proctor & Gamble owns brands such as Duracell, Gillette, Hugo Boss, Olay, SK-II, Mach3, Tampax, Venus, Wella, Oral-B, Mister Clean, Herbal Essences, Dolce & Gabbana, Braun, Covergirl and Max Factor.

The volume of shares traded came in at just 1.62 billion today, worth $4.57 billion. 569 shares were up, 435 finished weaker and 381 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 0.02 pct or 1 pt to 4250.

Due to daylight savings, most major European markets are now trading between 7pm (AEDT) and 3.30am (AEDT). Futures in Europe are pointing to a slightly lower start to trade tonight.

Dow Futures are currently lower; indicating that U.S stocks 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 US106.1 cents and €81 cents. The AUD is currently trading at £67.7 pence, which is back up around a 27 year high. Part of the reason that the AUD has gained over the past 24 hours against the greenback is the fact that the U.S Federal Reserve (America's central bank and equivalent of Australia's Reserve Bank) indicated that interest rates will likely remain at around 0 pct until at least 2012. This has resulted in weakness of the U.S dollar against most major currencies and also boosted commodity prices overnight.

Steven Daghlian, CommSec Market Analyst

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