Australian Stock Market Report - Afternoon 2/29/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket improved for the first time this week today, with the All Ordinaries Index (XAO) gaining 0.8 pct or 36.9 pts to 4388.1.

All sectors with the exception of the consumer discretionary stocks ended higher today, with the miners and banks leading the rally. BHP Billiton (BHP) improved by 0.98 pct or 35 cents to $36.10 while the smaller Rio Tinto (RIO) eased by 0.37 pct or 25 cents to $67.45.

The four major banks all ended in the black, with National Australia Bank (NAB) the standout, up 1.63 pct or 38 cents to $23.67, Westpac (WBC) jumped 1.06 pct or 22 cents to $20.90, Commonwealth Bank (CBA) gained 0.57 pct or 28 cents to $49.93 while ANZ Banking Group (ANZ) rose 0.32 pct or 7 cents to $21.95.

On the reporting front today, engineering outfit WorleyParsons (WOR) and specialty retailer, Harvey Norman (HVN) both released their profit results.

WorleyParsons (WOR) delivered a slightly lower than expected first half (July to December 2011) underlying profit result of $151.9 million. It recorded growth in all its divisions, with particular strength from its Australian, Canadian and U.S units. Expansion in the developing world continues to add value to its engineering business. WOR provides professional services to the mining sector and a number of other industries.

Since listing in 2002, revenue has increased most years, it now has 37,800 employees and its founder, John Grill is one of Australia´s richest men. WOR announced a $0.40 a share dividend which is scheduled to be paid to eligible shareholders on March 30. This is an 11.1% rise on the corresponding distribution back in 2010, however is slightly lower than market consensus. Worley´s share price has jumped by 16% in 2012, significantly outperforming the broader market (not including today´s price move).

Harvey Norman (HVN) reported a 2 pct fall in first half (July to December) profit to $128.95 million. The retailer said that a high Australian dollar (AUD), a more conservative consumer and increased competition hurt its bottom line. HVN shares fell 4.17 pct or 9 cents to $2.07, however have still gained around 10 pct so far this year.

Today was the busiest day of the week for economic news with a number of reports issued. Retail spending edged higher by 0.3 pct in January with Australians continuing to increase their spending in the hospitality sector such as in cafes and restaurants.

Commsec Economist, Savanth Sebastian said that "The continued sluggishness in retail activity is certainly disappointing. Retail sales rose by just 0.3 per cent in January after sliding by 0.1 per cent in December. The latest result comes after consumers have had a couple of months to adjust to the rate cuts that took place last year. And while policymakers have underestimated the conservatism of consumers, the anecdotal evidence would suggest that consumers are spending on services rather than goods. In addition the modest lift in non-food spending is also encouraging."

The number of new homes sold in January slumped by 7.3 pct, which is its lowest reading in over a decade. Mr Savanth Sebastian said that "Aussie consumers and home-buyers remain super-cautious and that mood is continuing to constrain activity for retailers and housing-dependent businesses. Anecdotally the recent drop in interest rates is boosting enquiry levels in the housing market, but it is yet to show up in healthy rise in housing activity. In fact the latest data on new home sales clearly highlights that the sector is yet to show signs of emerging from the recent downturn."

No major data was released in the region today however business confidence in New Zealand improved strongly while the number of new building consents (approvals) jumped by 8.3 pct in the previous month.

Last night in Europe, a report was released showing that the average German citizen is a little more confident with the state of the economy and their finances.

Tonight, the European Central Bank (ECB) will be making almost an unlimited amount of funds available to European financial institutions at low interest rates. German unemployment numbers, French consumer spending and an inflation reading will all be delivered overnight.

Last night in the U.S, the Dow Jones Index closed above the 13,000 pt mark for the first time since May 2008. U.S shares have almost doubled in value since March 2009, when shares hit a low. Germany's DAX is up 87 pct over the same period while Australia's XAO has significantly underperformed and is only up around 40 pct.

Most global markets are still to return to the highs hit back in October 2007. The U.S sharemarket is closest however and is only 7.7 pct lower than levels hit back in 2007. The Australian market is still 35 pct lower than highs attained back in that year.

Tonight, a quarterly GDP (growth) reading will be released while the U.S Federal Reserve Chairman, Ben Bernanke will be testifying.

Oil prices have pulled back a little to around US$107 a barrel, however are still up close to 10 pct this month. Tensions between the Middle East and the West continue to be one of the main drivers. Europe is expected to initiate an oil embargo against Iran in July this year. Peripheral Eurozone nations import a significant amount of oil from Iran. Greece, for example imports a third of its oil from the nation.

The volume of shares traded came in at 2.39 billion today, worth $7.07 billion. 508 shares were up, 502 were weaker and 418 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is up 0.63 pct or 27 pts to 4284.

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.

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 US108 cents, and is trading around its highest level since the start of the month. The AUD is currently trading at £67.8 pence and €80.21 cents.

Steven Daghlian, CommSec Market Analyst

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