Australian Stock Market Report - Afternoon 2/8/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket rose for the second time this week today with the All Ordinaries Index (XAO) up 0.4 pct or 18.8 pts to 4363.7. All sectors ended higher with the exception of the utilities which lost a little ground.

We are currently in week one of the corporate earnings season and Australia's largest listed company issued its results today. BHP Billiton (BHP) posted a US$9.9 billion profit in the previous half (July to December 2011). This result was a little lower than market consensus (expectations) and 7.1 pct weaker than in the previous corresponding period. This was also the first profit decline for BHP in three years.

BHP is by far the largest company on the ASX and makes up around 9 pct of the XAO. Revenue was higher than forecast by the market and there was an increase in the announced dividend from $0.46 to $0.55. Strong results from both its iron ore and petroleum divisions added most substantially to the earnings while its coal and base metal operations were weak. Iron ore contributed around half of the company's bottom line while oil made up a quarter. Over the period, BHP approved five major projects for which it committed US$4.0 billion. Its shares fell by 0.4 pct or 15 cents to $37.75 however its stock has gained by 10 pct so far in 2012 (calendar year).

Tomorrow, News Corp (NWS), Telstra (TLS), Tabcorp (TAH) and RIO Tinto (RIO) are all expected to release their profit results. RIO will be announcing its results at around 5.30pm (AEDT). On Friday, Australia's largest gold producer, Newcrest Mining (NCM) will deliver its half year result at around 11am

Three of the four major banks ended higher today, with National Bank (NAB) the worst performer for the second straight day. Yesterday, NAB fell close to 4 pct and another 1.21 pct or 28 cents to $22.93 today. This follows on from a disappointing trading update. Commonwealth Bank (CBA) eased by 0.38 pct or 19 cents to $50.32 while Westpac (WBC) fell 0.1 pct or 2 cents to $20.90. ANZ Banking Group (ANZ) was the only major to improve and gained 1.17 pct or 25 cents to $21.61.

Financial services company, Suncorp (SUN) has had an 'A' issuer credit rating assigned to it by ratings agency, S&P. SUN is expected to be sending 65 jobs offshore. Its shares rose 3.55 pct or 29 cents to $8.47.

Gunns (GNS) shares shot the lights out today after reaching a deal to raise $280 million via a share deal with New Zealand billionaire, Richard Chandler. GNS shares rose 36 pct or 4.5 cents to 17 cents.

There was no major, market moving economic data released today. The latest consumer sentiment reading was scheduled to be issued however was been pushed back a week. This was to see how the Reserve Bank's (RBA) shock decision to keep interest rates unchanged yesterday will impact consumer sentiment.

There was no major economic data out in the region yesterday, however a few interesting reports were issued today in Japan. The latest economy watchers sentiment index was out at 4pm (AEDT) and showed that those involved with markets consider the economic situation in Japan worsening. The index fell from 47.0 to 44.1 while the market was expecting a reading of around 47.6. This index is put together by conducting a survey of around 2,000 Japanese employees. Any reading below 50.0 indicates investor pessimism.

Out of Europe last night, France posted a slightly better than expected trade deficit of €5.0 billion in December. Tonight, Germany will announce its latest trade balance which should be an interesting contrast to France. Germany is expected to post a €14.1 billion surplus, which is greater than any other European nation. The situation does not seem to be improving in Greece at the moment with a meeting of European leaders scheduled to take place yesterday being delayed.

In the U.S last night, Federal Reserve Chairman, Ben Bernanke testified on the economic outlook and federal budget situation before the Senate Budget Committee in Washington DC. Mr Bernanke looked past the better than expected jobs report out last week and reiterated that the Fed is not expecting a significant improvement in the U.S employment story. The market cheered his comments which generally seemed to indicate that interest rates would remain low for an extended period of time.

This was released at 2am (AEDT) this morning and resulted in market gains almost immediately. Chairman Bernanke's comments tend to be listened to carefully for hints of potential future actions of the central bank. The U.S Federal Reserve is the American equivalent to Australia's Reserve Bank.

No major economic data is scheduled for release in the U.S tonight.

Tonight, the Canadian, American and German governments are all raising funds via the bond market.

The volume of shares traded came in at 2.24 billion today, worth $5.2 billion. 576 shares were up, 392 finished weaker and 403 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is up 0.21 pct or 9 pts to 4256.

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 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 US108.1 cents (around a six month high) and €81.56 cents. The AUD is currently trading at £68 cents. The AUD rose very strongly against a basket of currencies immediately following the RBA's rates decision tomorrow and has jumped by 8 cents against the greenback over the past six weeks.

Steven Daghlian, CommSec Market Analyst

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