Australian Stock Market Report – Afternoon 4/17/2012

MARKET CLOSE
(4.30pm AEST)

The Australian market was out of the blocks in positive fashion this morning with stocks up by close to 0.5 pct at one point only to fade away as the day progressed. In the final three or so hours of trade all the gains dissipated with the All Ordinaries Index (XAO) ending 0.3 pct or 13.7 pts lower to 4368.8. It was also another quiet session on the market today for the second consecutive day.

Last night, both the European and American markets improved which was a bit of surprise considering that the Spanish government's borrowing costs are at unsustainable levels. Spain is the Eurozone's fifth largest economy.

Investors instead focused on a report showing that Americans are spending more at the retail level than expected. European markets so far this month are doing it tough however. Shares in Germany and France are down by more than 5 pct while shares in Spain are around 10 pct lower in April.

Most sectors lost ground today, with the miners the worst hit. The energy players, consumer staples, industrials and even the defensive telcos all ended in the red today. The retailers outperformed the broader market with David Jones (DJS), Harvey Norman (HVN) and Kathmandu (KMD) all gaining by more than 1 pct.

Rio Tinto (RIO), Australia's second largest miner gave the market an update as to how it has fared in the first three months of the year. The company has increased production of key commodities such as coal and iron over the past 12 months partly due to better weather conditions. Investors were not impressed however, with RIO shares down by almost 0.5 pct by close of business. Production has fallen compared to the previous quarter (December quarter) however. RIO shares are up approximately 8 pct since the start of the 2012 calendar year which is a little better than the XAO. Singlehandedly, RIO accounts for a little over 2 pct of the whole Australian sharemarket.

The major banks were mixed today, with Westpac (WBC) and ANZ Banking Group (ANZ) falling by around 0.5 pct, Commonwealth Bank of Australia (CBA) ended unchanged while National Australia Bank (NAB) gained 0.81 pct or 20 cents to $24.85.

On the economic front today, the Reserve Bank of Australia (RBA) issued the minutes from its latest interest rate meeting. It seems more likely than not that rates will be cut in May by 25 bps to 4 pct for the first time this year. This will be the first rate cut for the central bank in 2012 and would take rates to their lowest levels since March 2010.

Commsec Economist, Savanth Sebastian said that "While the minutes suggest that the Reserve Bank maintains an easing bias, the final hurdle to a rate cut next month remains the quarterly inflation data - released next Tuesday. In our view if the inflation result comes in at or below 0.7 per cent for the March quarter, it should provide the Reserve Bank with additional degree of comfort and allow policy makers to cut interest rates by 25 basis points. In fact we expect headline inflation to be of a much more subdued nature coming in around 0.5 per cent with underlying inflation at 0.6 per cent for the March quarter - in short providing the Reserve Bank with the valid scope to cut rates."

A report out this morning showed that there was a 4 pct rise in the number of cars sold in March. Sports Utility Vehicles (SUV)/4WDs are remaining as popular as ever. Mr Sebastian said that "The latest set of car sales data is encouraging. In March, car sales recorded the best monthly increase in eight months is up 4 per cent on a year ago. Clearly the improvement in car affordability is the clear driver. Car affordability is at the best levels since the 1970s, and coupled with the recent rate cuts it seems to have prompted consumers to update their rides."

No major economic data is scheduled for release tomorrow in Australia however BHP Billiton (BHP) is scheduled to issue its March quarter (January to March) production and exploration report while Bank of Queensland (BOQ) will announce its first half results. Austar United Communications (AUN) is expected to release its first quarter financial results. Last week, Foxtel received the go ahead from the Federal Court to take over the regional subscription television provider.

In the region today, most markets lost ground, with shares in South Korea down around 0.3 pct, stocks in Hong Kong dropped by 0.6 pct and the market in Taiwan slumped by 1.86 pct. A report in Japan showed that household confidence in the world's third largest economy improved slightly in March. Japan's Nikkei 225 index eased by 0.06 pct or 5.93 pts to 9464.71.

In Europe tonight, at around 7.30pm (AEST) the latest inflation (CPI) reading will be released in both the U.K and the Eurozone for March. The results of a survey of institutional investors and analysts in Germany will be issued at 8pm. The survey aims at measuring their confidence levels in April.

In the U.S tonight, around 36 major companies are scheduled to release their latest profit results. This includes household names such as IBM, Intel, Yahoo!, Coca-Cola and Goldman Sachs. The forward looking March reports for building permits and housing starts will both be out at 10.30pm (AEST) in addition to industrial production numbers. The property numbers out tonight give investors an idea of how many properties are expected to be built in the future.

Volume of shares traded came in at 1.75 billion today, worth $3.81 billion. 362 shares were up, 587 were weaker and 398 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.26 pct or 11 pts to 4302.

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 £64.9 pence and €78.65 cents.

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