Australian Stock Market Report - Afternoon 2/15/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket was trading in the red until some upbeat comments from the head of China's central bank gave the market a boost. The All Ordinaries Index (XAO) rose by 0.2 pct or 8.5 pts to 4327.4. Most sectors gained some ground, however the miners and health care stocks held the market back.

Commodity prices fell overnight and the world's largest miner, BHP Billiton (BHP) eased by 0.19 pct or 7 cents to $36.10 while RIO Tinto (RIO) lost 0.59 pct or 41 cents to $68.87.

On the reporting front today, Westfield (WDC), Fortescue Metals (FMG) and Primary Healthcare (PRY) all released their profit results.

Fortescue Metals (FMG), Australia's third largest iron ore miner released its half year results (July to December 2011). The result was slightly below market expectations, reporting net profit after tax of US$801 million and posting record operating revenue of US$3.35 billion. The highlight of the result was the increase in the tonnage of ore shipped in the half up 36% to 26.6million tonnes.

Fortescue did advise the market that its March 2012 quarter iron ore production would be reduced because of the rain and flooding from Cyclone Hiedi after it caused closure of mine sites and the Port of Port Headland. Cyclone Hiedi has also delayed the completion of the fourth berth at the Port which is now set to be completed in March 2013 rather than by the end of this year. FMG shares fell 1.43 pct or 8 cents to $5.53.

Westfield (WDC), one of the world's largest owners of shopping malls delivered a full year net profit (Jan to Dec 2011) of $1.53 billion. This was largely in-line with market expectations. Its Australian and New Zealand operations contributed to half of the company´s total revenue while its U.S business made up 40% of sales. WDC has entered a joint venture with the Canada Pension Plan Investment Board, selling a 45% stake in 11 U.S centres for almost $2.2 billion. WDC currently has 118 shopping centres under management in five countries and $2.4 billion of projects under construction.

In the U.K, its Stratford City development (the largest urban shopping centre in Europe) is well placed to take advantage of this year´s Olympic Games foot traffic. It has announced its intentions to start an on-market buyback of up to 10% of issued shares and will pay a $0.242 final dividend on 29 Feb. This takes its dividend payments for the year to $0.484. WDC shares improved by 5.26 pct or 44 cents to $8.81.

The big four banks all ended higher by market close, with Commonwealth Bank (CBA) up 0.54 pct or 27 cents to $50.23, Westpac (WBC) rose 0.29 pct or 6 cents to $20.96, National Australia Bank (NAB) edged higher by 0.13 pct or 3 cents to $23.05 and ANZ Banking Group (ANZ) ended only 0.05 pct stronger.

On the economic front, a monthly report has shown that Australians are more confident now with the state of the economy and their finances than they were at this time last month. The Westpac/Melbourne Institute index of consumer confidence rose 4.1 pct in February to 101.1. Any reading above 100.0 indicates investor optimism.

Commsec Economist, Savanth Sebastian said that "While consumer confidence rose over the month, the latest result can only be categorised as mixed. Not only did confidence fall across a couple of the key states but sentiment levels are crawling off a sustained period of weakness. In fact the 12-month rolling average of the consumer sentiment index hit a 28-month low in the latest reading. Far more improvement is required to justify a turnaround in consumer perceptions."

A report on car sales has shown that there was a 1.3 pct rise in the number of new motor vehicles sold in January, following a 2.7 pct slump in December. Mr Sebastian said that "The latest car sales result is encouraging suggesting consumers are tentatively picking up spending on big ticket items. Car sales are now up just shy of 3 per cent on a year ago. Overall the sector is now back on an even keel, however it will take an improvement in economic conditions to prompt consumers to commit to larger purchases."

Australians are remaining very cautious when it comes to taking on additional debt however. A report released monthly by the Australian Bureau of Statistics (ABS) has shown that total lending finance fell by 0.1 pct December, adding to the 7.1 pct slump in November.

To put the above weakness into perspective however, Mr Sebastian pointed out that "Importantly the lending data doesn't fully factor in the two rate cuts by the Reserve Bank late last year. And over the next few months the perception that interest rates are likely to fall further will help to support activity - especially considering that both households and business remain cashed up."

In the region today, the head of China's central bank made favourable comments regarding the Eurozone at an exhibition on the Euro in Beijing. Amongst other things, he said that China will continue to invest in European government debt and that China remains confident the European nations will find a way to solve the debt crisis. Markets in the region started improving following the commentary. Shares in Japan are up 2.3 pct, up 2 pct in Hong Kong, 1.1 pct in South Korea and 0.85 pct higher in mainland China.

In the Eurozone overnight, markets reacted to Moody's downgrades of Portugal, Italy, Spain, Malta, Slovakia and Slovenia. The ratings group also lowered the outlook for France, the U.K and Austria.

Tonight, we will find out if some of Europe's largest economies grew or contracted in the previous quarter. This includes France, Germany and Italy in addition to the broader Eurozone. The market is currently expecting all the above economies to have contracted between October and December last year. At around 8.30pm (AEDT), we will find out if the U.K's unemployment rate remains steady at 8.4 pct. The Portuguese government will be raising funds via the bond market tonight.

In the U.S last night, some worse than expected economic data held the American markets back. The latest retail sales report for January showed that consumers remained more cautious than expected in January.

Tonight, the Federal Reserve's minutes from its last meeting on monetary policy will be released.

The volume of shares traded came in at 1.92 billion today, worth $4.88 billion. 439 shares were up, 527 finished weaker and 394 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 0.14 pct or 6 pts to 4214.

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 stronger 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 US107.4 cents and gained strongly following the comments from the head of China's central bank. The AUD is currently trading at £68.3 pence and €81.5 cents.

Steven Daghlian, CommSec Market Analyst

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