Australian Stock Market Report – Afternoon 4/24/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket rose for the first time this week, with the All Ordinaries Index (XAO) edging higher by 0.1 pct or 3.6 pts to 4433.9. Yesterday was the second quietest day for the Aussie market however today was a little busier. The Australian and New Zealand markets will be closed tomorrow due to the ANZAC day holiday.

We improved despite heavy falls offshore, driven by European manufacturing industry weakness and question marks over the stability of Eurozone politics.

Wesfarmers (WES), the owner of Kmart, Target, Bunnings and Coles rose by 1.84 pct or 54 cents to $29.88 today after releasing its quarterly sales update to the market. Coles made $7.85 billion in sales between January and the end of March this year. This is around 40 pct less than the larger Woolworths (WOW). Coles currently has 745 supermarkets and 886 liquor stores

Most sectors gained today, however weakness from our mining and energy companies held the market back. Rio Tinto (RIO) fell by 1.58 pct or $1.05 to $65.60 while the larger BHP Billiton (BHP) dropped 0.68 pct or 24 cents to $35.08.

The big four banks gained ground, with Westpac (WBC) the standout after rising 1.49 pct or 33 cents to $22.47 and ANZ Banking Group (ANZ) improving by 1.11 pct or 26 cents to $23.72. Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) both rose by around 0.3 pct.

Most retail stocks did well, with Myer (MYR), Westfield (WDC) and Harvey Norman (HVN) all jumping by at least 1 pct.

On the economic front today, the latest Consumer Price Index (CPI) came in at a much lower than forecast 0.1 pct. The market expected a number closer to 0.6 pct. This makes it almost certain that the Reserve Bank of Australia (RBA) will be cutting interest rates for the first time this year next week. The market is factoring in a 26 pct chance of a 0.5 pct rate cut.

Commsec Economist, Savanth Sebastian said that "Inflation is well and truly contained and the Reserve Bank is all but certain to cut interest rates on May 1. The low inflation data removes the last hurdle for the Reserve Bank to cut interest rates next month. The sluggishness in the domestic economy has ensured that businesses continue to absorb any increases in costs, while the strength of the Australian dollar continues to keep imported prices low. In addition the uncertainty and downside risks to the global economy have resulted in subdued commodity price in recent months. Not only was the headline inflation rate virtually flat, but the closely-watched underlying measures also recorded decidedly subdued readings. In addition annualised underlying inflation has fallen to the bottom of the Reserve Bank's 2-3 per cent target band. The average of the three key underlying inflation measures stands at 2.1 per cent. It's clear that domestic inflation is unlikely to stand in the way of a rate cut next month."

Markets in the region ended mixed today with shares in Japan, South Korea and China finishing lower. Shares in Hong Kong and Taiwan ended higher. Yesterday, a report released by HSBC showed that China's manufacturing industry improved a little this month compared to March. The more important official government report will be out next Tuesday. No major data was issued in the region.

Europe's manufacturing industry showed signs of contraction overnight and political problems in the Netherlands weighed on markets. Dutch Prime Minister, Mark Rutte will hand in his government's resignation today after a Member of Parliament quit austerity talks, which were meant to cut costs to €16 billion. The Netherlands is the Eurozone's fifth largest economy and still have a AAA credit rating, which is now under threat. In France, a close election is expected on May 6. No major data is scheduled for release tonight in Europe. Tomorrow, the European Central Bank's head will be speaking while the latest growth numbers will be issued in the U.K.

In the U.S tonight, 132 companies will be posting their profit results including Apple, 3M, AT&T and Ford. Apple is currently the world's biggest company (by market cap). If Apple was listed on the ASX it would make up around 40 pct of the Australian sharemarket. To put the size of Apple into perspective for you, it is larger than BHP Billiton, Rio Tinto, the big four banks, Telstra, Westfield and Woolworths.

Last night, Texas Instruments shares improved in the latter part of trade after posting better than expected profit results. The company is the world's third largest manufacturer of semiconductors behind Intel and Samsung.

Facebook also reported that profit slipped a touch to US$205 million in the first quarter of the year (January to March)

Tomorrow night in the U.S, durable goods orders and the monthly Federal Reserve interest rate meeting is due to take place. 214 companies will be posting their profit results including Boeing, Caterpillar and Delta Airlines.

Volume of shares traded came in at 1.98 billion today, worth $4.74 billion. 382 shares were up, 629 were weaker and 400 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down 0.14 pct or 6 pts to 4352.

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 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 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 US102.7 cents and is trading at a 2-week low. This was following a much lower than expected inflation report this morning. The AUD is currently trading at £63.6 pence and €78.03 cents.

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