Australian Stock Market Report - Afternoon 3/1/2012

MARKET CLOSE
(4.30pm AEDT)

A wise man once said that yesterday is history, tomorrow is a mystery and today is a gift. However, today was the sort of present investors would have preferred not to have received. The Australian sharemarket fell for the third time this week today, with the All Ordinaries Index (XAO) down 1 pct or 42.1 pts to 4346.

The reporting season has essentially come to an end and today, with Australia's largest supermarket chain, Woolworths (WOW) reporting a slightly better than expected 1H12 (July to December 2012) profit result. Profit fell to $977 million over the period with the sale of its Dick Smith Electronics stores costing the company $300 million in restructuring costs. A $0.59 a share dividend is scheduled to be paid out to eligible shareholders, which is a 3.5 pct rise on the corresponding period in 2010. WOW shares ended flat.

BHP Billiton (BHP) and Rio Tinto (RIO) both fell today, with RIO down 1.78 pct or $1.20 to $66.25 while the larger BHP dropped by 1.52 pct or 55 cents to $35.55.

The big four banks all ended lower with ANZ Banking Group (ANZ) the worst performer after losing 1.18 pct or 26 cents to $21.69. Westpac (WBC) slumped by 0.96 pct or 20 cents to $20.70, Commonwealth Bank of Australia (CBA) fell 0.75 pct or 37 cents to $49.06 and National Australia Bank (NAB) eased 0.38 pct or 9 cents to $23.58.

On the economic front today, a report has shown that home prices rose by 0.8 pct in February eating away at the 1 pct fall recorded in January.

Commsec Economist, Savanth Sebastian said that "The lift in house prices in February is encouraging. Across Australia house prices rose by 0.8 per cent and while that may not sound like much it is the biggest monthly increase in property prices in 19 months and a welcome turn from the sustained weakness recorded last year. In addition prices rose in six of the eight capital cities - highlighting the underlying strength in residential property."

Australia's manufacturing sector expanded for the third straight month in February, with the Performance of Manufacturing Index (a measure of manufacturing performance) eased slightly but still remained above 51.3. A reading above 50.0 indicates improving conditions.

Commsec Economist, Savanth Sebastian said that "Looking forward it is unlikely the manufactures will be getting too far ahead of themselves despite the modest turnaround in fortunes. While two interest rate cuts have provided a boost to domestic spending and production, the high Aussie dollar is still making life difficult for exporters, whilst domestic demand remains soft and more competitive - due to cheaper foreign imports."

In the region today, an update on the state of China's manufacturing industry was issued. At midday, China's official government manufacturing reading showed signs of improving conditions within the sector. This helped initially trim the losses on the Australian market. The reading came in at 51.0 which was a touch higher than the 50.9 that the market was forecasting. A reading above 50.0 indicates improving conditions. At 1.30pm, HSBC released its version of the report, which came in at 49.6, indicated that the manufacturing sector continues to contract slightly. Despite the differences between both reports, it is quite clear that the manufacturing sector in general (private and public sectors) currently remain quite stagnant.

In Europe last night, the European Central Bank (ECB) offered almost unlimited funds to European banks at low interest rates. This process has been termed LTRO or Long-Term Refinancing Operations. 800 European banks borrowed €529.5 billion from the ECB in the form of 3-year loans at just 1 pct interest rates. Italian banks borrowed €139 billion, making up 26 pct of all funds on offer. Intensa, Italy's second largest bank borrowed €24 billion. The market was expecting demand to fall somewhere between €200 billion and €1 trillion.

Tonight, we will find out if the Eurozone's unemployment rate will remain steady at 10.4 pct.

In the U.S last night, America's growth rate (GDP) for the December quarter (October to December) was revised upwards from 2.8 pct to 3.0.

Tonight, weekly unemployment claims, a manufacturing reading and a personal income report will all be issued in the U.S.

The volume of shares traded came in at 2.06 billion today, worth $4.66 billion. 385 shares were up, 665 were weaker and 394 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 0.05 pct or 2 pts to 4247.

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 weaker 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 US107.4 cents. The AUD is currently trading at £67.4 pence and €80.53 cents.

Steven Daghlian, CommSec Market Analyst

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