Australian Stock Market Report - Afternoon 1/6/2012

MARKET CLOSE (4.30pm AEDT)

It certainly has been a volatile week for the Australian sharemarket. We kicked off the year in positive fashion with shares improving for two consecutive sessions. The All Ordinaries index (XAO) rose by 1.07 pct on Tuesday (the first trading day of the week) followed by a 2.03 pct improvement on Wednesday. The situation went a little pear shaped in the later part of the week though with the XAO slumping by 1.01 pct on Thursday. Shares today dropped by 0.8 pct or 32.1 pts to 4164.5.

The S&P/ASX 200 Materials index (a measure of how the mining sector has performed) dropped by 1.09 pct or 118.7 pts to 10733. Australian index leader BHP Billiton (BHP) fell 1.62 pct or 58 cents to $35.24 while the smaller RIO Tinto (RIO) lost 0.53 pct or 33 cents to $62.52.

The S&P/ASX 200 Financials index (a measure of how the financial stocks performed today) fell 0.92 pct or 36.6 pts to 3944.3. Australia's largest bank by market capitalisation (number of shares on issue multiplied by its current share price) eased by 0.28 pct or 14 cents to $49.51. The worst performer of the day was ANZ Banking Group (ANZ) which slumped by 1.4 pct or 29 cents to $20.45, followed by National Australia Bank (NAB) and Westpac (WBC) which both fell by very close to 1.4 pct.

The airlines were mixed today with Qantas Airways (QAN) falling 3.93 pct or 6 cents to $1.46 while Virgin Australia (VAH) rose 1.69 pct or 0.5 cent to 30 cents. The good news for aviation in 2011 was the fact that 2011 was the safest year on record. According to The Economist newspaper there was only 1 death per 1.52 million flights last year. The five most significant accidents took place in Iran, Russia and Congo and claimed the lives of 250 passengers.
In Asia today, Kodak continues to remain in focus over bankruptcy fears. One of the big three ratings agencies, Moody's downgraded the photographic equipment company's rating last night. In U.S trade, Eastman Kodak has slumped by 65 pct over the past three months.

Looking ahead to European trade tonight, the latest report on retail sales, German factory orders and a jobs report will all be released. At 9pm (AEDT) we will find out if the Eurozone's unemployment rate will remain at 10.3 pct. Also at 9pm (AEDT) the latest report on retail sales will be out and will show us if the European consumer is remaining cautious to part with their cash. The market is expecting a 0.2 pct fall in sales.

Last night, Europe's financial sector remained in focus. Italy's largest financial institution, Unicredit slumped by 17.3 pct due to the company's plans to raise capital via a rights issue at a significant discount to its share price a few days ago.

This was partly due to the company's need to meet the European Union's capital requirements. A number of other banks on the continent were punished overnight due to concerns that they would also need to raise additional capital. French banks Credit Agricole, BNP Paribas and Societe Generale all fell by more than 5 pct as did German bank, Deutsche Bank.

In the U.S tonight the major economic release will be the official monthly nonfarm payrolls report which measures the change in the number of private and government sector jobs in the previous month. The U.S unemployment rate is expected to rise a touch from 8.6 pct to 8.7 pct. Three members of the U.S Federal Reserve will also be delivering speeches throughout the evening at three separate events. The market is expecting that around 152,000 jobs were created last month.

Last night, there were some very positive numbers out in relation to the number of private sector jobs created in December. There were almost twice as many jobs created in the American private sector than expected. 325,000 jobs were added, compared to the expected 178,000. This was the biggest gain in the year 11 year history of the report. There was also a fall in the number of Americans filing to receive unemployment benefits from the U.S government for the first time last week.

The volume of shares traded came in at 1.13 billion today, worth $3.06 billion. 362 shares were up, 453 finished weaker and 348 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 1.35 pct or 56 pts to 4079.

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 weaker 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 US102.2 cents and €80.08 cents.

Steven Daghlian, CommSec Market Analyst

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