Australian Stock Market Report - Afternoon 3/13/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket more than made up for yesterday's disappointing start to the week, with the All Ordinaries up 1.1 pct or 48.3 pts to 4,336.5. This is the best daily performance from local shares in around three weeks.

The People's Bank of China (China's central bank) said it plans on letting the market dictate the strength of the Yuan (China's currency) a little more than it has in the past. This has been a topic of discussion between the West and China for a number of years.

Australia's largest forestry company, Gunns (GNS) has been suspended from official quotation today ahead of a company announcement. GNS has been actively negotiating a capital raising with details yet to be finalised.

One of the best performing stocks today was Australia's biggest insurance company, QBE Insurance (QBE) which rose by 5.33 pct or 63 cents to $12.46 and is trading at around a two month high. QBE fell sharply following a downgrade to its profit expectations in January.

The major banks make up around a quarter of the Australian market and contributed most significantly to the gains. National Australia Bank (NAB) jumped 1.46 pct or 34 cents to $23.68, ANZ Banking Group (ANZ) rose 1.7 pct or 37 cents to $22.11, Westpac (WBC) improved by 1.12 pct or 23 cents to $20.74 and Commonwealth Bank of Australia (CBA) gained 1.11 pct or 53 cents to $48.37.

Commodity prices were mixed overnight, but there was nothing indecisive about the gains in the mining sector today. BHP Billiton (BHP) jumped 1.27 pct or 44 cents to $35.15 while the smaller Rio Tinto (RIO) rose 0.96 pct or 61 cents to $64.35.
On the economic front in Australia today, the latest housing finance report in addition to the NAB business survey were issued.

The number of new home loans issued fell for the first time in 10 months in January, with the number of new owner-occupier housing loans dropping 1.2 pct.

Commsec's Chief Economist, Craig James said that "Home prices are stagnant, so the average home loan is also not budging. Eventually the combination of a low jobless rate, flat home prices, tight rental markets and stable interest rates will lead to a wave of new home buyers. Builders will home this happens sooner, not later."

The monthly NAB business confidence index fell from +4.0 to a five month low of +0.9 in January. This is based on a survey of around 500 Australian businesses, asking them about their confidence levels in relation to both the economy and their finances.

Mr James commented by saying "Don't talk too loudly; you'll wake up Australia's businesses and home buyers. The latest figures suggest that the economy is largely running on the spot with new home loans going backwards and businesses lacking the confidence to ramp up activity. Higher bank interest rates in February probably restrained business confidence. It is also disappointing that the two rate cuts by the Reserve Bank have not provided much in the way of a lift for the housing market."

The average price of unleaded petrol last week fell by 0.2 cent to 145.8 cents a litre last week according to the Australian Institute of Petroleum (AIP). The average petrol price in Darwin was the highest of any major city at 155.8 cents a litre.

Mr James said that "Today, the national average wholesale (terminal gate) unleaded petrol price stands at 139.8 cents a litre, up just under 1.0 cents a litre from a week ago and the highest level since October 22 2008. CommSec expects the retail petrol price (pump price) to rise 1-2 cents over the next fortnight."

In the region today, Japan's central bank met and decided to keep interest rates steady for yet another month.

European markets improved for the fourth straight day last night, with Germany's DAX index the best, up 0.31 pct. No major data was issued.

Tonight, the 27 European Union Finance Ministers are meeting in Brussels. Germany will be issuing its latest economic sentiment report at around 9pm (AEDT) and the European Central Bank's President; Mario Draghi will be speaking at 11.30pm (AEDT).

In the U.S last night, February's Federal Budget Balance was released. This shows the difference between the government's income and spending. A staggering US$231 billion deficit was issued, making it one of the worst on record. This was also more negative than market expectations. February tends to be the worst month for the American government with receipts/income typically being lower than most other months. YTD (Year to Date), the U.S government has spent US$580 billion more than it has earned, which is slightly better than the previous year.

Last night, Yahoo! filed a lawsuit against Facebook and has said that "Facebook's entire social network model, which allows users to create profiles, is based on Yahoo's social network technology." It is now seeking damages and many are considering this to be a desperation move by the internet giant.

The market is awaiting the Federal Reserve's latest bank stress test results on Thursday night. This measures how America's 19 largest banks would perform in a severe downturn, including a 13 pct unemployment rate. The jobless rate in the U.S is currently sitting at 8.3 pct.

Tonight, February's retail sales report will be issued and a large 6 pct jump in sales is expected in North America. The release time is 11.30pm (AEDT) and could be a driver for markets in early trade. The U.S Federal Reserve monthly meeting also kicks off tonight. No change in credit policy settings is expected; however the language of the statement will be read and dissected by market participants. This will be issued at 5.15am (AEDT) tomorrow morning.

Volume of shares traded came in at 2.07 billion today, worth $4.47 billion. 615 shares were up, 410 were weaker and 369 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is flat.

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 in the black tonight. Due to daylight savings taking place in the second week of March in North America, U.S markets will now be trading between 12.30am (AEDT) and 7am (AEDT).

Turning to currencies, the Australian dollar (AUD) buys US105.5 cents, a little higher than this time yesterday. The AUD is currently trading at £67.4 pence and €80.1 cents.

Steven Daghlian, CommSec Market Analyst

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