Australian Stock Market Report – Afternoon 5/22/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket improved for the second straight day, something which has not happened in around 3 weeks. The All Ordinaries Index (XAO) jumped 1.2 pct or 49.1 pts to 4173.5. The market improved as the day wore on and ended close to the highs of the day.

European shares improved after four consecutive days of losses and the U.S markets gained after six down days. American shares have fallen for 13 of the past 16 sessions.

The energy sector was one of the best today, with the S&P/ASX 200 Energy index ending 1.83 pct or 225.7 pts higher to 12589.2. The price of oil rose, helped by comments from China's Premier Wen Jiabao which raised the likelihood of additional stimulus.

Qantas (QAN) has said that its international and domestic operations will be split in two. According to the company, there will still be only one listing for the airline on the local market. There will be four Chief Executive Officers (CEOs), reporting financial results separately. Qantas International, domestic, Jetstar and its frequent flyer department will have their own Chief Executives.

This change will enable a greater focus on turning around its international business and improving an already strong domestic operation. To put this into perspective, the domestic airline made $552 million while its international business lost $216 million last year.

Jetstar's CEO, Bruce Buchanan will be leaving the business after nine years with the airline, but will remain for the next six months to assist with the transition. He is also expected to provide consultancy for the next 18 months.

QAN shares rose 2.8 pct or 4 cents to $1.47, but have fallen by 57 pct over the past two years. The last time QAN paid a dividend was April 2009. QAN had paid a dividend each year since 1995 when it first listed on the ASX.

Construction company, Leighton Holdings (LEI) held its Annual General Meeting (AGM) today and said that it is on course to report a full year profit of between $400 million and $450 million. LEI shares rose 3.76 pct or 65 cents to $17.94.

Building and construction materials company, Boral (BLD) announced that its CEO will be stepping down from the role. In a statement issued by the company this morning, the board decided that the business needs a different kind of leadership style going forward. Ross Batstone was nominated for the role and has been with BLD for a number of years. BLD shares rose 1.4 pct or 5 cents to $3.61.

The dispute between BHP Billiton Mitsubishi Alliance and unions does not seem to be improving. Members of three unions have said that they will strike for seven days from this Thursday. Employees voted against the miner's recent workplace offer of a three year, 15 pct pay rise and a $15,000 bonus. The unions have said that having a say in safety measures is their biggest concern. BHP Billiton (BHP) shares rose 0.69 pct or 22 cents to $32.32, while Rio Tinto (RIO) jumped 1.68 pct or 94 cents to $56.89.

Australia's biggest telco, Telstra (TLS) rose 1.41 pct or 5 cents to $3.60 today. TLS has been outperforming the local market for some time, with its shares up 8 pct this year (compared to a 1.5 pct gain in the broader market) and a 19 pct gain last year (compared to a 15 pct fall for the sharemarket).

No major economic data was issued locally today. Yesterday, the Australian Institute of Petroleum (AIP) released its weekly report on petrol prices. The national average price of unleaded petrol fell by 2.5 cents per litre to 148.9 cents last week, easing from a 3.5 year high. The good news should continue for motorists, with prices at the pump likely to fall by as much as 4 cents per litre over the next fortnight. This is due to lower wholesale prices that are yet to be passed onto the consumer.

Tomorrow will be another quiet session for economic news; however the latest skilled vacancies index will be out for April. This is a gauge of labour demand in Australia. The Westpac-Melbourne Institute will also release its leading indices of economic activity. Neither report is market moving however.

Department store owner, Myer (MYR) will issue its third quarter sales results tomorrow. The retailers share price has significantly underperformed the market since listing on the ASX in 2009. In 2010, MYR shares fell 2.47 pct, 45.5 pct in 2011 however have gained by 10 pct so far this year.

Oil and gas exploration and production company, Tap Oil (TAP) will be holding its Annual General Meeting (AGM) tomorrow. TAP first listed on the Australian sharemarket in 1996, has its head office in Western Australia and a market capitalisation (number of shares on issue multiplied by its share price) of $159 million. A number of other smaller miners, including Moly Mines and Alkane Resources will be meeting with shareholders also.

In the region, Chinese Premier Wen Jiaboa has called for additional measures to support growth. This has raised hopes of further stimulus in the world's second largest economy. Tomorrow will be busy in Japan (third biggest economy) with the Bank of Japan holding its monthly meeting on rates and monetary policy in addition to the release of its trade balance at 9.50am (AEST). The market is expecting another trade deficit.

In Europe tonight, the latest consumer confidence report will be out at 12am (AEST). Consensus (market expectations) is for sentiment to remain steady and negative at -20. Any number below 0.0 indicates pessimism.

In the U.K, the latest inflation report will be out at 6.30pm (AEST). Consumer inflation (CPI) is expected come in at around 3.1 pct for the past 12 months. The Bank of England (BOE) will be issuing its latest inflation letter at some point overnight.

In the U.S, a Federal Reserve official (Federal Reserve Bank of Atlanta President) will be delivering a speech in Hong Kong. A report on existing home sales in the U.S for the month of April will be out at 12am (AEST). The market expects a 2.5 pct rise in sales. A manufacturing index is also scheduled for release and is forecast to worsen slightly.

Social media giant, Facebook (FB;us) had a disappointing second session of trade last night, with its shares falling close to 11 pct, which is well below its issue price of US$38. FB shares hit their high point on Friday of US$45 (an 18.4 pct rise), however it was short lived.

Volume of shares traded came in at 1.67 billion today, worth $4.74 billion. 704 shares were up, 305 were weaker and 332 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.07 pct or 3 pts to 4138.

Due to daylight savings, most major European markets are now trading between 5pm (AEST) and 1.30am (AEST). Stocks are expected to open in the black tonight.

Dow Futures are higher, indicating that U.S stocks could open stronger 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 is more than US0.5 cent stronger than this time yesterday and buys US99.2 cents. The AUD is currently trading at £62.7 pence and €77.5 cents.

Australia is a commodity based economy, with commodities in general account for almost 80 pct of all our exports over the past nine months. In essence, when the going gets tough globally, there is fear of less demand for our commodities, which tends to result in a weaker AUD.

[Kick off your trading day with our newsletter]