Australian Stock Market Report - Afternoon 1/31/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket was higher for part of the day however was not able to hang onto gains for the whole session. The All Ordinaries index (XAO) fell 0.2 pct or 8.7 pts to 4325.7 and lost ground for the second straight day.

The miners and financials both ended in the red today which was enough to drag the XAO into negative territory. Both sectors combined account for more than 60 pct of the index. The world's largest resource company, BHP Billiton (BHP) eased by 0.5 pct or 19 cents to $37.48 while the smaller RIO Tinto (RIO) edged higher by 0.23 pct or 16 cents to $69.16. BHP is around four times as large as RIO on the Australian market. Yesterday, RIO slumped sharply while BHP ended flat.

The financials struggled today however Westpac (WBC) managed to rise 0.24 pct or 5 cents to $21.15. Commonwealth Bank of Australia (CBA) fell 0.74 pct or 38 cents to $50.66, National Australia Bank (NAB) dropped 0.25 pct or 6 cents to $23.85 and ANZ Banking Group (ANZ) lost 0.28 pct or 6 cents to $21.41.

It was not all bad news however as the retailers performed more impressively than most. Department store owner David Jones (DJS) extended its gains and rose by 5.71 pct or 14 cents to $2.59 while discount retailer JB Hi-Fi (JBH) jumped by 6.6 pct or 78 cents to $12.60. Woolworths (WOW) ended 1.39 pct or 34 cents higher to $24.79. WOW today said that sales at its supermarkets were weak in the last three months of 2011. The company is planning on selling its Dick Smith business. Around 100 Dick Smith stores could be shut down over the next two years. Those losing their jobs will be offered alternative placements within the Woolworths business.

On the economic front today, a report has shown that property prices in all capital cities across Australia fell in 2011. Brisbane was the worst performing state with home prices slumping by 6.8 pct over the year while property prices in Sydney only eased by 0.3 pct.

Commsec Economist, Savanth Sebastian said that "House prices fell for 11 out of the past 12 months of 2011, and it is clear that the sector is crawling off a low base. But delve a little deeper and there are encouraging signs within the data. Not only has there been a modest pickup in activity across the sector, but rental vacancy rates remain strong. In fact total returns on residential property were just shy of 1 per cent for 2011 - a darn site better than the share market where an 11 per cent slide was recorded in the All Ords Accumulation Index (dividends plus capital growth)."

The NAB business confidence index rose from +2.4 to +2.9 in December showing that the Australian business world is feeling a little more upbeat about the state of the economy.

Commsec Economist, Savanth Sebastian said that "It's no secret that businesses have found trading conditions particularly difficult over the past year. But the rate cuts are helping to instil a degree of confidence and also reduce borrowing costs for businesses and consumers. There is no doubt, that there is still a long way to go to claim a full blown turnaround in activity levels, but the rate cuts will continue to have a snowball effect on the economy, supporting and propelling momentum."

In Asia yesterday, Japanese consumer electronics company Canon experienced a rise in net profit despite a strong Japanese Yen. China said it has no plans on expanding a property tax trial in 2012.

Today, Japan's unemployment rate rose from 4.5 pct to 4.6 pct.
European shares fell to a 2-week low last night as talks about how to save Greece continue to dominate discussions. The European leaders met last night at the European Economic Summit in Belgium for the 17th time in tw. While this took place, the largest general strike in over six year was held in Brussels to dispute austerity measures.

French banks also struggled partly due to comments from French President Nicolas Sarkozy confirming that he still has plans to impose a financial transactions tax. This could kick off as early as August. France's equivalent to the GST is expected to rise by 1.6 pct to 21.2 pct from October 1. Credit Agricole fell 6.5 pct, BNP Paribas slumped 7 pct while Societe Generale lost 6.5 pct. British banks such as Barclays and Lloyds both dropped by more than 4 pct.

Despite all this, President Sarkozy said that the "...financial crisis is subsiding. Europe is no longer at the edge. We must now devote all our efforts to solving the economic crisis."

In Europe tonight, the latest retail sales report will be posted in Germany. We will also find out Europe's jobless rate will rise from 10.3 pct to 10.4 pct as expected. Youth employment for those between 16 and 24 in the Eurozone (the 17 nations currently using the Euro) is sitting at a touch over 20 pct. Youth joblessness in Portugal is around 30 pct, over 45 pct in Greece and at over 50 pct in Spain

Last night in the U.S, markets ended slightly lower by 0.1 pct. Despite the fall, American markets were down by as much as 1 pct earlier in the session only to improve as the day wore on.

Tonight, the latest report on consumer confidence will be issued for the month of January and a further recovery in sentiment is expected. The Case Shiller home prices report will be out for November. Home prices fell by around 3.4 pct over the year.

On the earnings front, internet sales giant Amazon and McGraw-Hill Companies will both be posting their profit results. McGraw-Hill is a textbook and magazine publisher and is the parent company of ratings agency; Standard & Poor's and has approximately 20,000 employees. The business was founded back in 1888.

The volume of shares traded came in at 1.91 billion today, worth $4.33 billion. 468 shares were up, 465 finished weaker and 410 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is up 0.24 pct or 10 cents to 4236.

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 stronger start to trade tonight.

Dow Futures are currently higher; indicating that U.S stocks could open a touch better 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 US106.3 cents and €80.6 cents. The AUD is currently trading at £67.5 pence.

Steven Daghlian, CommSec Market Analyst

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