Australian Stock Market Report - Afternoon 2/27/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharmarket lost ground for only the second time in five sessions, with the All Ordinaries Index (XAO) falling by 0.8 pct or 34.5 pts to 4354.5. The good news is that last week was the best week of 2012 to date with shares improving by 2.7 pct.

In percentage terms, the miners and energy stocks were the worst performers today, with the S&P/ASX 200 Energy index falling by 1.18 pct while the S&P/ASX 200 Materials index lost 1.55 pct. Both of these indices are tools to measure the performance of both sectors. The world's largest miner, BHP Billiton (BHP) fell 1.97 pct or 72 cents to $35.82 while the smaller Rio Tinto (RIO) dropped 1.01 pct or 69 cents to $67.40.

The big four banks were helping to minimise losses early in trade however all turned negative in late trade. Commonwealth Bank (CBA) and ANZ Banking Group (ANZ) both fell by a little over 0.5 pct, Westpac (WBC) fell 0.34 pct or 7 cents to $20.71 while National Bank of Australia (NAB) eased 0.13 pct or 3 cents to $23.49.

On the earnings front, oil refiner, Caltex (CTX) recorded a full year loss of $714 million following significant write-downs. CTX provides around a third of all transport fuels in Australia and its shares are up 10 pct in the 2012 calendar year. CTX shares eased by 0.62 pct or 8 cents to $12.90 today.

The profit reporting season is now winding down to a close, however a number of big names will still announce their latest profit results (either half yearly or annual) over the coming days. This will include Harvey Norman (HVN), QBE Insurance (QBE) and Woolworths (WOW).

Australia's largest gold producer, Newcrest Mining (NCM) was one of the worst performers of the day and ended 3 pct or $1.04 lower to $33.51. NCM shares have slumped by over 7 pct since last Thursday; however have still improved by close to 13 pct in 2012. Last week, NCM warned of further disruptions at its Lihir operations.

The next few days will be quiet on the economic front; however a number of reports are scheduled for release on Wednesday. This will include the latest update on home prices and retail spending.

Retail trade is expected to have improved by just 0.5 pct in January, with Australians spending less on goods and more on services. Home prices in capital cities are expected to show signs that they are stabilising after recent falls.

The average price of unleaded petrol across the country rose by 0.7 cent to 142.9 cents a litre last week.

Commsec Economist, Savanth Sebastian said that "As we highlighted last week petrol prices were likely to reverse direction and rise by around 1 cent a litre, and the latest data from the Australian Institute of Petroleum has confirmed that prices are starting to creep higher. And unfortunately for motorists it is unlikely to get any better over the next couple of weeks especially given that the low price in the petrol discounting cycle took place late last week."

The price of crude oil has continued to rise and currently sits at US$109 a barrel, close to a 10 month high. The price of oil has jumped by 11 pct in February and 46 pct since October last year. This is partly due to tensions in the relationship between the Middle East and the West.

On a positive note, Mr Sebastian said that "The one advantage that Aussie motorists have is the strength of the Australian dollar, but even the stronger domestic currency can only do so much, and as such most of the increase in the global oil price will filter through to domestic pump prices over the coming fortnight."

No major economic data was released in the region today. Tomorrow, Japan's retail sales report for January will be issued and is expected to have contracted slightly. On Wednesday, a report on business confidence will be out in New Zealand in addition to a building consents reading. This measures the change in the number of new building approvals granted by councils to developers and gives us an insight into what the construction sector might look like down the track. On Friday, the latest inflation reading (CPI) will be out in Japan and is expected to remain flat. Japan's latest unemployment rate will be issued and is expected to have fallen from 4.6 pct to 4.5 pct.

In Europe tonight, the German parliament is expected to vote on the Greek bailout deal. Next week, the Netherlands and Finland will undertake a similar vote. Tomorrow, the results of a German survey of around 2,000 consumers on their level of confidence will be issued at 6pm (AEDT). On Wednesday, the monthly report on Germany's unemployment change will be out at close to 8pm (AEDT), while the latest French consumer spending report and Europe's inflation reading will both be announced. On Thursday, Italy's jobless rate is expected to remain steady at 8.9 pct, as is the Eurozone's at 10.4 pct.

In the U.S on Friday, some better than expected economic data early in the session helped stocks edge higher over the first hour of trade. In the final two hours of trade, the Dow Jones Index (a popular measure of U.S sharemarket performance) slipped into negative territory, with investors content staying on the sidelines ahead of key meetings. U.S markets ended flat on Friday, however improved by 0.6 pct over the week.

Tonight, a pending home sales report will be issued at 2am (AEDT). The market is expecting pending home sales to rise by 1.1 pct in January following a 3.5 pct pullback in December. This measures the change in the number of homes already under contract but awaiting settlement. It is a forward looking indicator of U.S economic health due to the far reaching impact of homes sales. This week will be heavy on economic news in the world's largest economy, with home price data out tomorrow, the December quarter (October to December 2011) growth reading out on Wednesday and a report on the state of the U.S manufacturing industry out on Thursday.

The volume of shares traded came in at 2 billion today, worth $4.29 billion. 484 shares were up, 573 were weaker and 381 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 0.05 pct or 2 pts to 4268.

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 lower; indicating that U.S stocks could open a touch weaker 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 US106.8 cents and is trading at around the same level as this time last year. The AUD is currently trading at £67.3 pence and €79.4 cents.

Steven Daghlian, CommSec Market Analyst

[Kick off your trading day with our newsletter]