Australian Stock Market Report - Afternoon 3/15/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket lost ground today for the second time this week, with the All Ordinaries Index (XAO) easing 0.2 pct or 8.7 pts to 4366.9. This follows on from two consecutive sessions of gains with the Aussie market rising by 2 pct on Tuesday and Wednesday combined.

Some were left a little disappointed considering the European markets hit a fresh 8-month high overnight, while U.S shares improved for the sixth consecutive day.

The mining sector was the biggest drag on trade, with the S&P/ASX 200 Materials index slumping by 1.18 pct or 132.6 pts to 11100.3. Base metal prices fell off the back of a strengthening U.S dollar. A rise in the greenback tends to result in weaker commodity prices (because commodity prices are denominated in U.S dollar).

BHP Billiton (BHP) fell 1.21 pct or 43 cents to $35.18 while the smaller Rio Tinto (RIO) eased by 0.57 pct or 37 cents to $64.93. Steelmaker, OneSteel (OST) is set to be cutting more jobs in Wollongong, with another steel plant expected to close its doors. OST shares rose 2.15 pct or 2.5 cents to $1.19. The gold producers struggled today, partly impacted by a 3 pct drop in the price of the precious metal overnight. Australia's third largest iron ore producer, Fortescue Metals (FMG) rose 2.57 pct or 15 cents to $5.98 after it raised $2 billion via a bond issue. The funds are expected to be used for the expansion of its iron ore business in Western Australia.

The major banks did their part, with Commonwealth Bank (CBA) and National Australia Bank (NAB) both rising around 0.3 pct, Westpac edged higher by 0.1 pct while ANZ Banking Group (ANZ) eased 0.09 pct or 2 cents to $22.28.

Myer (MYR), one of Australia´s largest department store chains made $88 million in profit for the 1H12 (26 weeks to January 28). This was lower than market expectations. Its best performing categories were, Womenswear, Childrenswear and Cosmetics.

Retail spending across Australia is growing at its slowest pace in 50 years, with department stores amongst the worst affected. A strong dollar is making online purchases more attractive to consumers. MYR is taking a number of steps to improve customer satisfaction. This is one area where face to face retailers can take away business from the online players. MYR announced a dividend of $0.10 a share, payable to eligible shareholders on May 10.

Its shares have struggled since listing on the ASX back in November 2009, down 42% from its IPO (Initial Public Offering) price as of yesterday´s close. MYR shares have improved by 22% so far this year nonetheless. It has maintained full year profit guidance of ´´...no worse than 10% below FY11 NPAT of $162.7 million.´´ MYR shares fell 3.38 pct or 8 cents to $2.29.

It was an uninspiring session for economic news today, with total lending finance relatively unchanged in January, which is a further sign that Australians are shying away from debt. The number of new cars sold last month also ended largely flat which is proof of a conservative consumer.

Commsec's Chief Economist, Craig James said that "New car sales rose by less than 0.1 per cent in seasonally adjusted terms in February, after rising by 1.2 per cent in January. It was the second small rise in sales in four months."

He went on to say that "The latest data will accelerate the calls for another rate cuts. Consumers and businesses lack confidence, spending is sluggish and jobs are being trimmed. However it's not all bad news - lending is actually up on a year ago - the only problem is that it is limping, not leaping, higher."

No major economic data was released in the region today.

In Europe last night, the British unemployment rate stayed steady at its worse level since 1995 at 8.4 pct. The number of people claiming unemployment benefits jumped more than expected and has increased for the 12th straight month. Tonight, a quarterly employment report will be released for the Eurozone. Inflation remained broadly unchanged and solid demand from an Italian bond auction supported the market. Germany's DAX index rose 1.19 pct overnight and was the best of the major global markets.

In the U.S last night, Apple (AAPL;us) shares improved, taking the gains YTD (Year to Date) to 45 pct. Note that YTD is from the beginning of the calendar year. This compares to the Dow Jones index (a broad measure of U.S share performance) rising by only 8 pct over that period. Over the past six days, U.S shares have gained 3.36 pct.

Tonight, the latest producer prices for February will be issued and are expected to come in broadly unchanged. Weekly unemployment claims for past week will also be released at around 11.30pm (AEDT).

Volume of shares traded came in at 2.44 billion today, worth $5.93 billion. 433 shares were up, 591 were weaker and 381 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 US104.9 cents and is relatively close to a seven-week low. The AUD is currently trading at £66.9 pence and €80.3 cents.

Steven Daghlian, CommSec Market Analyst

[Kick off your trading day with our newsletter]