Australian Stock Market Report – Afternoon 4/16/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket lost ground for the first time in three sessions, with the All Ordinaries Index (XAO) down 0.5 pct or 21.7 pts to 4382.5. All sectors ended in the red with the exception of the telcos, with Telstra (TLS) up 0.3 pct or 1 cent to $3.37.

Last week, most markets lost ground partly due to lower than expected growth numbers in China and uncomfortably high borrowing costs for the Spanish government. This was one of the reasons that European markets fell by around 2.5 pct on Friday night. Half of Spain's younger workforce (workers under 25 years of age) are out of work while Spain has the Eurozone's worst jobless rate at 23.3 pct. This is even worse than the official Greek unemployment rate.

The miners were the hardest hit with the S&P/ASX 200 Materials index down 1.04 pct or 114.5 pts to 10844.7. Australia's second largest miner, Rio Tinto (RIO) dropped 1.15 pct or 76 cents to $65.19 while the larger BHP Billiton (BHP) eased by 0.46 pct or 16 cents to $34.31.

Over the coming days we are expected to hear from some of the country's biggest names in the mining and energy sector with their quarterly updates and production reports out. This will include Fortescue Metals (FMG), BHP, Santos (STO) and Woodside Petroleum (WPL).

Three of the four major banks fell slightly while ANZ Banking Group (ANZ) managed to rise 0.61 pct or 14 cents to $23.12.

The retail sector was mixed, with Kathmandu (KMD), David Jones (DJS), Myer (MYR) and Harvey Norman (HVN) all losing ground while Billabong (BBG) and JB Hi-Fi (JBH) improved modestly.

Regional subscription television company, Austar (AUN) announced that it had received court approval relating to Foxtel's acquisition of the company. Foxtel's $2 billion takeover of AUN received a tick of approval from the Federal Court last week. The company announced that AUN will be suspended from quotation on the market from the close of business today. It first listed on the ASX in 1999 and has jumped by 27 pct since the start of the year.

On the economic front today, lending finance figures were released for the month of February and the latest weekly petrol price report was issued by the Australian Institute of Petroleum (AIP).

Total lending finance fell by 6.5 pct in February, with falls recorded in the housing, personal and commercial lending sectors.

Commsec Economist, Savanth Sebastian said that "The lack of lending is clearly a dampener on future activity, as any pickup in borrowing tends to lead to spending down the track. It is clear that businesses and consumers are lacking confidence at present. And while households and businesses remain cashed up, there does not seem to be a catalyst on the horizon that will shift this conservative stance in the near term. The downside risks to the global economy and tough trading conditions domestically will continue to restrict momentum and dampen activity."

Petrol prices rose slightly last week but prices are starting to stabilise. Commsec expects the national average price of unleaded petrol to ease by between 2 and 3 cents a litre over the next fortnight.

Mr Sebastian said that "Over the past week petrol prices have risen to fresh 3½ year highs, and while it has certainly been tough few months for motorists, it does seem like that a reprieve is around the corner. Regional oil prices have fallen in the past week and even the Aussie dollar has managed to trek modestly higher - all pointing to falling pump prices in a fortnight's time."

Looking ahead to the rest of the week, tomorrow the Reserve Bank's (RBA) board minutes will be issued. This will give us further insight into the current thinking of the central bank on rates. The RBA is likely to await the next batch of quarterly inflation figures out early next week before making a decision on rates. Should inflation (the change in prices for goods and services paid by consumers) remain under control, the RBA would be more likely to cut rates next month for the first time in 2012.

Markets in the region struggled today following the horrid session for most markets in both Europe and the U.S on Friday. Shares in the U.S were down by more than 1 pct while European stocks fell by around 2.5 pct. This was due in part to borrowing costs for the Spanish government rising to uncomfortably high levels. Half of Spain's younger workforce (people under 25 years of age) is currently out of work while almost one in four people in Spain are unemployed. It currently has the highest jobless rate of any Eurozone nation (17 nations make up the Eurozone).

Shares in Japan are down 1.41 pct, South Korean equities are 0.73 pct lower, stocks in Hong Kong are down 0.69 pct while China's Shanghai Composite Index is down by 0.36 pct.

It will be a relatively quiet week for economic news in the region this week however Japan's latest trade balance (exports less imports) will be out for the month of March on Thursday while the Bank of Japan's Governors Shirakawa will be delivering a talk in New York.

In Europe tonight, the latest trade balance will be issued for the Eurozone at 7pm (AEST). Looking ahead, the U.K's jobless rate will be released on Wednesday while consumer confidence reports are scheduled for issue in both Germany and the broader Eurozone over the coming days.

The International Monetary Fund (IMF) will be issuing its World Economic Outlook tomorrow night. This tends to be a large document consisting of a few hundred pages and gives a broad overview of the health of the global economy. The IMF also produces forecasts for most regions and large economies of the world. The results of this report could influence markets in our region on Wednesday.

In the U.S tonight, 12 large American companies will be issuing their March quarter (January to March) profit results. This includes big names such as Charles Schwab (U.S Brokerage Company) and Citigroup (one of America's largest banks). The American retail sales report for March will be out at 11.30pm (AEST), with sales expected to lift by a modest 0.4 pct over the month.

Hundreds of major companies will be delivering their quarterly profit results over the week, with household names such as Coca-Cola, Intel, IBM, McDonalds, Yahoo!, YUM! Brands (the owner of Pizza Hut, KFC and Taco Bell) and Microsoft among them. The latest reports on the construction and property markets will be announced over the coming days also.

Volume of shares traded came in at 1.67 billion today, worth $3.2 billion. 341 shares were up, 641 were weaker and 380 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.16 pct or 7 pts to 4310.

Due to daylight savings, most major European markets are now trading between 5pm (AEST) and 1.30am (AEST). Futures in Europe are pointing to a slightly weaker start to trade tonight.

Dow Futures are currently a little lower; indicating that U.S stocks could open in the red tonight. Due to daylight savings taking place in the second week of March in North America and the end of daylight savings in Australia, U.S markets will now be trading between 11.30pm (AEST) and 6am (AEST).

Turning to currencies, the Australian dollar (AUD) buys US103.3 cents. The AUD is currently trading at £65.2 pence and €79.4 cents.

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