Australian Stock Market Report – Afternoon 4/23/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket ended in negative territory for the first time in four sessions today. The All Ordinaries Index (XAO) fell 0.3 pct or 14.1 pts to 4430.3. Today was also one of the quietest starts to a new trading week this year. Local shares attempted a comeback at lunch, following a report in China showing a slight improvement in China's manufacturing sector.

All sectors except the telcos lost some ground today. The world's biggest miner, BHP Billiton (BHP) fell 0.51 pct or 18 cents to $35.32 today, while the smaller Rio Tinto (RIO) ended 2 cents higher.

Three of the four major banks rose ever so slightly today, which helped limit the losses on the broader market. National Australia Bank (NAB) eased by 0.44 pct or 11 cents to $25.08.

Qantas (QAN) CEO, Alan Joyce today has pledged to add as many flights as required to help maintain its significant 65 pct market share of Australia's domestic market. Mr Joyce is also pushing for a second Sydney Airport to be built as soon as possible, due to congestion. QAN shares fell 2.12 pct or 3.5 cents to $1.61 today but are still up around 10 pct in 2012.

One of the country's largest uranium companies, Paladin Energy (PDN) said it will be raising US$225 million worth of funds via a bonds issue. The funds are expected to be partly used to fund projects in Africa.

Treasurer Wayne Swan has returned from Washington and has agreed to contribute another $7 billion to the International Monetary Fund (IMF). An additional $430 billion has been pledged by global nations, with around half of which came from the Eurozone. Interestingly, it is likely to receive a big chunk of those funds via loans from the IMF eventually.

On the economic front today, a report has shown that due (in part) to a stronger Australian dollar (AUD), the prices that businesses are paying for goods have fallen for the first time since late 2009. Import prices fell by 1.5 pct last quarter. This perhaps would make the Reserve Bank of Australia (RBA) feel slightly more comfortable to cut interest rates next week for the first time this year.

Tomorrow, the all-important Consumer Price Index (CPI) will be issued at around lunch. Today's business inflation report (PPI), makes it more likely that CPI will come in towards the lower end of market expectations.

Commsec Economist, Savanth Sebastian said that "It is clear that the strength of the Australian dollar has been a key factor in keeping down the cost of imported goods. In fact prices of imported goods recorded the biggest quarterly fall in five quarters. And looking forward the ongoing strength of the dollar should ensure that imported inflation remains subdued. Given the sluggish domestic environment, the cheaper prices for imported goods have provided retailers with a life-line. (This is) providing domestic business with the ability to discount goods in order to entice consumers."

Commsec's Chief Economist, Craig James issued the quarterly State of the States report, which was created to find out the standing of Australian states and territories based on a number of indicators.

Mr James said that "Western Australia comes out top on five of the eight criteria. The worst results were being ranked fourth on two of the eight indicators. So when discussing the Australian economy it is best to focus on two concepts: total Australia, and Australia excluding Western Australia. Western Australia leads the way on economic growth, construction work, unemployment, retail trade and equipment investment and second-ranked on population growth. Only in terms of dwelling starts and housing finance is Western Australia middle-ranked across Australia's state and territory economies. Queensland continues to creep up the performance rankings, together with NSW, and they are now alongside South Australia. Queensland is benefitting from rebuilding work while it is also second ranked on economic growth. NSW is solid in a relative sense on population growth and housing finance. South Australia does best on unemployment while it remains middle ranked on other indicators."

It will be a quiet week for economic reports this shortened trading week. The Aussie market will be closed on Wednesday due to the Anzac Day public holiday.

All markets except shares in the Philippines lost a little ground today. A report released by HSBC showed that China's manufacturing industry improved a little this month compared to March, however is still showing signs of contraction. The more important official government report will be out next Tuesday morning. Today's report focused on small and medium businesses while the official government figures also include larger Chinese companies.

This Friday will be the busiest day of the week in Japan. The Bank of Japan (BOJ) will be meeting for the second time in April. It will publish its forecasts for the Japanese economy, which could give insight into the likelihood of additional monetary easing. This will also be accompanied by retail sales, inflation and an update on household spending in Japan.

In Europe, politics will remain in focus with the G7 meeting also being held this week. Yesterday in France, the first round of the French elections took place and narrowed the race to just two potential candidates. The Socialist party's Francois Hollande finished first while the current President, Nicolas Sarkozy ended a close second. The biggest surprise perhaps was that the extreme right party called Le Front National (The National Front) came in third with 20 pct of the vote. The attention now turns to May 6, when the second and final round will take place. Either Nicolas Sarkozy or Francois Holland will be the President of France. While this might not seem important, political uncertainty and changes in Europe will likely keep investors on edge. The Greek elections will also take place in the first week of May.

In the U.S, 762 companies will be announcing their profit numbers for the first quarter of the year (January to March 2012) this week. Apple (AAPL;us) will be the largest company to release its earnings. To put the size of Apple in perspective for you, it is larger than BHP Billiton (BHP), Rio Tinto (RIO), the four big banks, Teltra (TLS), Westfield (WDC) and Woolworths (WOW) put together.

Tonight, a number of reports on the state of the Eurozone's manufacturing industry will be issued. In the U.S, 61 companies will be releasing their results including ConocoPhillips and Texas Instruments.

Volume of shares traded came in at 2.09 billion today, worth just $2.77 billion. 434 shares were up, 570 were weaker and 404 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down 0.37 pct or 16 pts to 4342.

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 weaker start to trade tonight.

Dow Futures are currently also 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 cents and has lost significant ground against the greenback since this morning. At 10am (AEST) this morning, the AUD was at US103.8 cents. The AUD is currently trading at £64 pence and €78.4 cents.

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