Australian Stock Market Report - Afternoon 1/30/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket was unable to stage a late comeback this afternoon, with the All Ordinaries index (XAO) ending the session 0.3 pct or 14.1 pts lower to 4334.4. Almost all regions of the market ended in the red with the exception of consumer discretionary companies and the utilities.

Despite the less than ideal start to the trading week, it is important to remember that shares locally have now improved for four consecutive weeks. While it perhaps does not sound impressive, the last time such a positive run took place was back in December 2010.

It is well known that 2011 was a horrendous year for the uranium miners due to the nuclear power plant catastrophe in Japan. This year has been much better for the uranium producers however, with Paladin Energy (PDN) up 5.78 pct or 10 cents to $1.83 today and has improved by around 30 pct in January. Keep in mind that PDN shares plummeted by around 70 last year. Tomorrow, the uranium miner will be releasing its latest production numbers for the December quarter (October to December 2011).

Supermarket chain, Woolworths (WOW) fell 1.29 pct or 32 cents to $24.45 while Wesfarmerd (WES) eased by 0.53 pct or 16 cents to $30.17. WES owns WOW's competitor, Coles. This week both companies will release their latest sales numbers.

The world's largest miner, BHP Billiton (BHP) ended the day flat after only rising by 1 cent to $37.67 while the smaller RIO Tinto (RIO) slumped by 1.12 pct or 78 cents to $69.00.

The financial sector ended the day in the red with Westpac (WBC) the worst of the majors after falling by 0.89 pct or 19 cents to $21.10. National Australia Bank (NAB) fell 0.71 pct or 17 cents to $23.91 and both Commonwealth Bank (CBA) and ANZ Banking Group (ANZB) ended a little weaker.

Telstra (TLS) fell 0.3 pct or 1 cent to $3.31 while the retailers did better than most. David Jones (DJS) rose 3.38 pct or 8 cents to $2.45 and Harvey Norman (HVN) gained 2.5 pct or 5 cents to $2.05.

On the economic front today, the national average Australian price of unleaded petrol fell by 0.5 cent to 143.5 cents a litre last week.

Commsec Economist Savanth Sebastian said that "...the strength of the Australian dollar has been a boon for motorists, ensuring that the recent gains in pump prices haven't been curtailed. In fact since the Aussie bottomed out six weeks ago it has risen by over 7 per cent ensuring that motorists are saving between 8-10 cents a litre. And looking forward the recent rally in the Australian dollar should ensure that petrol prices track sideways for the next couple of weeks. "

A report released by Commsec today has also shown that Australians are still remaining very cautious to spend on the more expensive and luxurious big ticket items.

Mr Sebastian said that "An index on luxury cars has highlighted the conservative nature of Aussie consumers. The CommSec Luxury Car index fell by 8.2 per cent in calendar year 2011, compared with sales of all passenger cars which fell by 5.5 per cent and total vehicle sales which were down 2.5 per cent."

For those wondering why the sale of luxury items such as cars is important, Mr Sebastian explained that "Luxury car sales are a useful leading indicator for the broader economy as well as highlighting the growing wealth levels of ordinary Australians. Interestingly the number of luxury car sales has consistently eased since peaking in September of 2010 - in line with the overall slowdown in the economy. No doubt the higher interest rates and uncertainty about the strength of the global economy weighed on consumers making them more cautious on spending over 2011. The top-end of the market tends to lead the broader economy and in that regard the modest signs that luxury cars sales are showing signs of turning the corner could bode well for activity levels over the next few months. In fact since bottoming out at a two-year low in October 2011, luxury car sales have risen as a share of total passenger car sales for two consecutive months - in line with the rate cuts and the recent improvement in house prices. Granted it is still early days but the improvement in luxury car sales in recent months does provide a degree of encouragement."

Most sharemarkets in the region resumed trade normally today after a week of interrupted trade throughout the Asia Pacific region. Last week, sharemarkets in China, Vietnam and Taiwan were closed for five straight days due to the Lunar New Year celebrations. The Hong Kong sharemarket was closed from Monday through to Wednesday as was the South Korean, the market in Indonesia was closed last Monday, and shares in Singapore and Malaysia were not trading on Monday or Tuesday last week.

No major data was released in Asia today however a number of reports will be issued in Japan tomorrow. This includes Japan's latest unemployment rate which the market is expecting to remain steady at 4.5 pct.

The European Union leaders will be meeting tonight in Brussels for what seems like the millionth time to sort through their financial woes. The latest Consumer Price Index (CPI) will be released in Germany tonight which the market is expecting has contracted by around 0.4 pct in the previous month. Inflation (the change in prices that consumers are paying for goods and services) is currently not a concern in Europe.

This week, the latest European unemployment rate will be out and is forecast to have edged higher from 10.3 pct to 10.4 pct in December 2011. Later on this week a number of reports on the state of the European manufacturing sector will be out while the latest retail sales report will be issued on Friday night.

It will be relatively quiet in the U.S tonight in regards to economic data. The latest report on both personal income and spending will be released prior to American market open. This measures the change in how much a typical American is making and spending in any given month. Both readings are expected to edge higher slightly.

Social networking giant, Facebook might also be adding the sharemarket as a friend sooner rather than later. There has been speculation that the company is seeking to be listed on the NYSE (New York Stock Exchange) at some point this year and could be filing papers to get the ball rolling as early as this Wednesday. By most market valuations, Facebook is worth around US$75 billion to US$100 billion.

On Friday night the latest monthly report on the state of the jobs market will be issued in the U.S. Most economists are expecting that around 185,000 jobs were added last month and for the American unemployment rate to remain steady at 8.5 pct.

On the earnings front this week in the U.S, both Amazon and Exxon will be posting their profit results.

The volume of shares traded came in at just 1.48 billion today, worth $3.43 billion. 436 shares were up, 514 finished weaker and 407 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 0.07 pct or 3 pts to 4242.

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 US105.6 cents and €80.2 cents. The AUD is currently trading at £67.3 pence.

Steven Daghlian, CommSec Market Analyst

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