Australian Stock Market Report - Afternoon 1/5/2012

MARKET CLOSE (4.30pm AEDT)

The Australian sharemarket gave back part of its weekly gains today with all sectors ending the session in the red. The All Ordinaries index (XAO) slumped by 1 pct or 42.9 pts to 4196.6. It is important to remember however that shares rose by over 3 pct over the first two trading days of the week (Tuesday and Wednesday).

Part of the reason for today's selloff is the fact that European sharemarkets struggled overnight and ended mostly lower. Italy's largest financial institution, Unicredit fell by more than 10 pct in Italian trade last night after the company announced plans to raise as much as €7.5 billion via a rights issue at a significant discount to the current traded price. This raised concerns that other European banks would follow its example. Unicredit has around 40 million customers worldwide.

The S&P/ASX 200 Financials index slumped 0.88 pct or 35.3 pts to 3980.9. The big four banks all ended in the red, with National Australia Bank (NAB) the worst of the majors, down 1.94 pct or 47 cents to $23.73, ANZ Banking Group (ANZ) dropped by 1.33 pct or 28 cents to $20.74, Westpac (WBC) lost 0.93 pct or 19 cents to $20.30 and Commonwealth Bank of Australia (CBA) eased by 0.68 pct or 34 cents to $49.65. Note that the NAB has been one of the better performers over the past few sessions.

The S&P/ASX 200 Materials index fell 1.24 pct or 136 pts to 10851.7. The world's largest miner, BHP Billiton (BHP) slumped by 1.1 pct or 40 cents to $35.82 with the smaller RIO Tinto (RIO) easing by 0.48 pct or 30 cents to $62.85.

The traditionally defensive telco sector also lost ground with the S&P/ASX 200 Telecom Services index losing 1.12 pct or 13 pts to 1148.1. The largest company in the sector (by a significant margin), Telstra (TLS) fell 1.17 pct or 4 cents to $3.37 today however did rise by 20 pct in 2011.

The results on the economic front were also a little worse than expected today. Australia recorded another trade surplus however it narrowed for the third straight month to $1.38 billion. This measures the difference between what Australia exported offshore and what it imported from foreign nations. A surplus obviously implies that exports exceed imports.

Commsec's Chief Economist, Craig James said that "Australia's trade surplus fell by $38 million to $1,380 million in November. It was the third straight month that the surplus has fallen. Exports of goods and services rose by 0.2 per cent, while imports of goods and services rose by 0.4 per cent. Exports are up 11.2 per cent on a year ago while imports are up 14.9 pct."

The latest report on car sales was also released and 82,459 cars were sold in December. This is close to a 5 pct drop on a year ago. Mr James said that "One in every four vehicles sold in Australia is a sports utility vehicle or 4WD. And when it comes to just traditional passenger cars and 4WDs, the latter accounts for one in three purchases. Whether it is perceived safety, features, flexibility or fuel efficiency of diesel models, it is clear that Australians have a love affair with 4WD vehicles."

On the economic front in Europe tonight, Germany will release its latest report on retail sales which will give us an idea how freely the German consumer is parting with their cash. A modest 0.2 pct improvement is expected by the market. Italy will also release its latest reading on the nation's unemployment rate which is still expected to remain at approximately 8.5 pct over the previous quarter.

Tonight will be quite busy in the U.S tonight because we will find out how many new jobs were added in the private sector last month via the ADP Non-Farm Employment Change report. The market is currently expecting that an additional 176,000 jobs were created last month. Tomorrow night the official government figures will be released and will give us an idea how many jobs were added in both the private and government sectors in December.

The volume of shares traded came in at 1.23 billion today, worth $2.78 billion. 347 shares were up, 509 finished weaker and 322 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 0.07 pct or 3 pts to 4132.

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 slightly lower indicating that U.S stocks are expected to open relatively flat 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) continues to gain against a basket of currencies and buys US103.1 cents and €79.9 cents.

Steven Daghlian, CommSec Market Analyst

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