Australian Stock Market Report - Afternoon 1/9/2012

MARKET CLOSE (4.30pm AEDT)

The Australian sharemarket was quite indecisive today with shares starting off in the black, only to remain in the red for most of the session and finish the day a little lower. The All Ordinaries index (XAO) fell 0.1 pct or 3 pts to 4161.5.

Around 30 pct of all traded shares ended the day unchanged with 40 pct losing some ground.

The retailers struggled with department store owner, David Jones (DJS) down 2.87 pct or 7 cents to $2.37, Westfield (WDC) eased by 0.24 pct or 2 cents to $8.31, JB Hi-Fi (JBH) fell 1.14 pct or 13 cents to $11.24 while specialty retailer Harvey Norman (HVN) managed to hold onto some gains and ended 0.54 pct or 1 cent higher to $1.86.

HVN boss, Gerry Harvey for the first time in thirty years said he has no plans of opening a new major store in Australia in 2012. A more conservative consumer and online sales have contributed to his decision.

Two of the world's largest miners, BHP Billiton (BHP) and RIO Tinto (RIO) both ended in the red with RIO down 0.59 pct or 37 cents to $62.15. Australia's largest gold miner, Newcrest Mining (NCM) was one of the better performers of the day with its shares rising 2.28 pct or 70 cents to $31.45.

As a sector, the telcos were the standouts today. Telstra (TLS), which makes up around 3.2 pct of the Australian sharemarket on its own rose by 1.2 pct or 4 cents to $3.37.

The four major banks were mixed for much of the session however ended mostly lower by close of business. ANZ Banking Group (ANZ) was today's exception with its shares up 0.44 pct or 9 cents to $20.54. Commonwealth Bank of Australia (CBA) fell 0.22 pct or 11 cents to $49.40, Westpac (WBC) eased by 0.15 pct or 3 cents to $19.99 and National Australia Bank (NAB) dropped by 0.13 pct or 3 cents to $23.37.

It was a busy session for economic news today, with the latest monthly report on retail sales coming in worse than expected. Sales at stores across the country remained almost completely flat while the market was expecting a 0.4 pct improvement to have taken place in November last year. Consumers are remaining cautious to part with their cash and department stores are one of the biggest underperforming areas of the sector. Sales at department stores have fallen for four consecutive months and for six of the past seven months. For those interested, the retail sales report is put together by conducting a survey of around 500 large businesses and 2750 smaller businesses.

Commsec's Chief Economist, Craig James said that "It is wrong to talk about one retail sector. The economy as a whole is multi-speed and that is very much the case in retailing. Aussies are indulging in beer and wine, lifting sales at liquor retailers by almost 9 per cent over the year. But fast food is apparently on the outer, down almost 3 per cent with newspaper and book retailing sales slumping by over 11 per cent. And then there is the complication of the strong dollar and cheaper gadgets, driving down nominal sales of clothing stores, department stores and electrical good retailers compared with a year ago."

The latest Housing Industry Association (HIA) report on the number of new homes sold in November has shown that there was a 6.8 pct improvement over the month. The November rate cut seemed to have given home sales a much needed boost.

Mr James commented by saying that "The November rate cut has worked its magic in giving a boost to the housing sector, but the same can't be said for retailers. Aussie consumers generally remained selective about purchases in the lead up to Christmas, but it is important to point out that spending trends differ markedly across the country. In Western Australia, consumers seemingly have a buoyant mindset with spending up 11 per cent on a year ago. But contrast this to the ACT with spending down over 3 per cent on a year ago while Tasmanian sales are largely unchanged on a year ago."

The average price of unleaded petrol last week fell by 1.4 cents to 140.3 cents a litre. However the wholesale price and the Singapore unleaded price of petrol (which has more of an impact on our final petrol prices at the bowser) have been on the rise. Commsec is expecting a 2 - 3 cent a litre lift in pump prices over the next fortnight.

In the Asian region today, the Japanese sharemarkets were closed due to the Coming of Age Day public holiday. This holiday is held once a year to celebrate with those who reached the age of maturity (20 years of age). Japan's two largest sharemarkets, the Tokyo and Osaka stock exchanges will recommence normal trade tomorrow.

No major economic news was released in the region. The main thing to keep an eye out for this week will be economic reports out of China this Thursday. One of the most important will be China's latest inflation reading (change in prices) which the market is expecting to have moderated once again.

It will be a relatively quiet session in Europe tonight on the economic front. Nevertheless, both Germany and France will be releasing their monthly trade balances (the difference between what those nations have exported and imported in the previous month). We will also find out what Switzerland's unemployment rate currently is. The market is expected the jobless rate to have edged higher from 3.0 to 3.1 pct.

Tonight, German Chancellor Angela Merkel and French President Nicolas Sarkozy will be meeting in Berlin to prepare for a Summit of European leaders later this week. In a few days both Italy and Spain will be holding their first bond auctions of the year. Both nations have a significant (billions of Euros worth) amount of debt to refinance.

Later this week both the European Central Bank (ECB) and the Bank of England (BOE) will be holding their monthly interest rate meetings. No major change in their monetary policy stance is expected (interest rates to remain the same). The focus will also remain on Greece with Greek Prime Minister, Lucas Papademos needing to have further austerity measures passed through parliament. This is to secure more bailout funds later on this year.

Out of the U.S, no major economic data is scheduled for release however a report on consumer credit and employment will be released. Neither one of these reports tend to be market moving in nature.

The main thing to keep an eye on this week in the world's largest economy is the U.S corporate earnings season. Aluminium producer, Alcoa tends to always unofficially kick off the earnings season. Profit for the S&P500 index (America's 500 largest publically listed companies) is expected to have increase by around 7.5 pct and sales are forecast to be up by 8.6 pct over the quarter (last three months of 2011).

The volume of shares traded came in at 1.3 billion today, worth $2.83 billion. 381 shares were up, 512 finished weaker and 350 ended unchanged. Activity is remaining subdued as tends to be the case at the start of a new year.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is up 0.15 pct or 6 pts to 4078.

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 weaker start to trade tonight.

Dow Futures are currently a touch lower indicating that U.S stocks are expected to kick off the New Year a little weaker. 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) remains above parity against the greenback and currently buys around US101.9 cents. The AUD is also trading around its best level on record against the Euro at EUR80.09 cents. The dollar lost a little ground following the barrage of economic data out at 11.30am (AEDT) this morning.
Steven Daghlian, CommSec Market Analyst

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