Australian Stock Market Report - Afternoon 2/9/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket ended slightly lower today for the second time this week. The All Ordinaries Index (XAO) fell 0.2 pct or 6.6 pts to 4357.1. Most sectors gained however the weakness from the miners put the most pressure on the market overall.

BHP Billiton (BHP) released a lower than expected profit result yesterday of US$9.9 billion for the 1H12 (July to December 2012). Its shares fell 1.56 pct or 59 cents to $37.16 today. After the market close, RIO Tinto (RIO) posted a US$15.5 billion profit for the full year which was broadly in line with market consensus.

Prior to market open this morning, Telstra, Australia´s largest telecommunications business and the local market´s sixth biggest company posted a slightly lower than expected profit of $1.47 billion. This was for the 1H12 (July to December 2011). As expected, Australians are continuing to replace their fixed lines with mobile phones. There was an 11 pct rise in revenue from its mobile phone operations with TLS adding 958,000 new customers in that area of its business (over just six months). The telco has also said it believes it is close to finalising the NBN transaction and is awaiting approval by the ACCC.

Telstra´s profit rose by 22.5%, while sales came in at $12.4 billion, both were a little lower than market forecasts. The telco declared a 14 cent a share dividend which will be paid to shareholders on the 23rd March. The company has paid a dividend of at least $0.14 for each half since 2005. It has also been one of the best performers on the market recently. In 2011, the Australian sharemarket fell by around 15 pct while TLS jumped by almost 20 pct. Today however, TLS shares fell 2.03 pct or 7 cents to $3.37.

Newscorp (NWS) reported a better than expected $1.06 billion profit in the second 2Q12 (October to December 2011). This was partly thanks to a strong performance at its film and cable television divisions. NWS shares rose 0.91 pct or 17 cents to $18.91.

All major banks gained ground today with Westpac (WBC) the best of the day, up 0.86 pct or 18 cents to $21.08.

It was relatively quiet in the region yesterday on the economic front, however a report showed that Japanese workers perceive Japan's economic situation to be worsening. The economy watchers sentiment 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 consumer pessimism.

In the region today, China released its latest inflation readings while Japan issued a few economic reports. China's Consumer Inflation reading (CPI) rose significantly more than expected in December, taking annual inflation to 4.5 pct. The market was expecting CPI to have eased to 4.1 pct. The Australian sharemarket pulled back initially following the release because higher inflation increases the chances that Chinese authorities will try and slow down their economy.

However it is important to put this in perspective. Commsec Economist, Savanth Sebastian said "The top line Chinese inflation reading certainly doesn't read too well. Inflation picked up pace surging by 1.5 per cent in the month of January and the first reactions by share markets and currency markets were negative. However that is where the bad news ends. The higher-than-expected inflation reading was dominated by the earlier than-usual celebration of Chinese New Year and the resulting spike in prices over the holiday season. In fact it was the earliest start to a Chinese New Year since 2004. This may explain why inflation in the subsector "recreation, education and culture" rose at a 0.7 per cent annual pace - marking the fastest growth pace in 12 months."

Last night in Europe, Germany announced a slightly lower than expected trade surplus of €13.9 billion. Switzerland's unemployment rate remained steady at 3.1 pct.

Tonight will be a busy night for the Europeans, with both the U.K's Bank of England and the European Central Bank both making decisions on their official interest rates. Rates are expected to remain on hold in the U.K at 0.5 pct and 1 pct in Europe. Both central banks will be issuing their accompanying statements tonight also which will be closely scrutinised by the market.

No major market moving data was released in the U.S last night, however the latest weekly jobless benefits report will be issued tonight at around midnight.

The volume of shares traded came in at 2.12 billion today, worth $4.99 billion. 505 shares were up, 487 finished weaker and 392 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is up 0.12 pct or 5 pts to 4260.

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 flat start to trade tonight.

Dow Futures are currently slightly 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 €81.3 cents. The AUD is currently trading at £68.2 cents.

Steven Daghlian, CommSec Market Analyst

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