Australian Stock Market Report – Afternoon 5/28/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket rose for the first time in four sessions today, with the All Ordinaries Index (XAO) up 1 pct or 39 pts to 4120.2. Despite the gains, there were around 25 pct less shares exchanging hands than this time last week. This is mainly due to the Memorial Day public holiday in the U.S tonight, which means American markets will be closed.

Most of the larger sectors gained strongly today. Energy, mining and financial stocks (which make up around 65 pct of the Australian market) all rose in excess of 1 pct. Iron ore producer, Fortescue Metals Group (FMG) jumped by 5.57 pct or 24 cents to $4.55 but is still down almost 20 pct this month.

There has been some speculation that the Australian part of Newscorp is looking to cut as many as 400 editorial positions, however the company has declined to comment. Newscorp (NWS) eased by 0.45 pct or 9 cents to $19.91 but has been one of the strongest performers this year after gaining by around 11 pct.

Qantas' (QAN) budget airline, Jetstar is being taken to court over allegedly allowing cabin crew hired in Thailand to be paid significantly less than the airline's Australian staff (as little as half). QAN shares till rose 3.09 pct or 4.5 cents to $1.50.

Agricultural chemicals manufacturer and supplier, Nufarm (NUF) said it is expanding its production capabilities in the U.S. The company is opening a new facility in Chicago. Last half, NUF generated around 36 pct of its sales in Australia and New Zealand and around 18 pct in the U.S (approximately $155 million in revenue). More than 70 pct of sales in North America were from selling herbicides. NUF shares fell 1.7 pct or 8 cents to $4.62.

The four major banks ended the day in the black, with National Australia Bank (NAB) up 1.5 pct or 35 cents to $23.65. Westpac (WBC) rose 1.39 pct or 28 cents to $20.40, Commonwealth Bank of Australia (CBA) improved by 1.15 pct or 56 cents to $49.28 while ANZ Banking Group (ANZ) gained 0.98 pct or 20 cents to $20.58.

The world's biggest miner, BHP Billiton (BHP) jumped by 1.39 pct or 44 cents to $32.05 while the smaller Rio Tinto (RIO) ended 1.73 pct or 97 cents higher to $56.90.

The retail sector was mixed, with David Jones (DJS), Myer (MYR) and Harvey Norman (HVN) all gaining by between 1 pct and 1.5 pct.

No major economic data was issued in Australia today, however the national average price of unleaded petrol fell by 2.1 cents to 146.8 cents a litre last week. The good news for motorists should continue thanks to a fall in wholesale prices.

Commsec Economist, Savanth Sebastian said that the "...downside risks to global growth, softer Asian oil demand and higher supplies have all been working in favour of Aussie motorists. The terminal gate or wholesale price of petrol has fallen over 9 cents a litre from the highs, or around 8 cents in weekly average terms. But so far the pump price has eased by just over 4 cents, so motorists can expect some short-term relief in the next week or so, with pump prices likely to fall around 3-4 cents a litre. The modest fall in domestic pump prices has a lot to do with what has been taking place on a global front. In fact the heightened risks to global growth have been the key driver of cheaper oil prices. The ongoing European debt concerns and slowdown in China have resulted in investors becoming more risk averse and as such commodity prices including oil futures have taken a hit. In addition US oil inventories have risen for the ninth straight week, with total inventories burgeoning out to a 21-year high, adding further downward pressure to prices."

Looking ahead to the rest of the week, on Wednesday the latest retail trade report will be issued locally. A lift in sales of around 0.3 pct is expected. Should the result be significantly weaker than expected, the Reserve Bank (RBA) could be a little more likely to cut rates earlier rather than later. The market is still factoring in an 80 pct chance of a rate cut next week of 0.25 pct.

Most markets in the region ended higher today, with New Zealand the exception after falling 0.69 pct. The Bank of Japan (BOJ) released its monetary policy meeting minutes this morning from its previous interest rate meeting. The Central bankers agreed that growth is likely to gradually improve and that inflation is expected to edge a little higher.

Last week, Japan recorded its 13th straight trade deficit (importing more than it exported overseas). This is around the time when the Japanese natural disasters and nuclear problems took place on March 11 last year.

All European markets will be open for business today, however both Germany and France will have bank holidays. No major economic news is scheduled for release in the Eurozone tonight. Over the weekend, five new polls in Greece showed that the pro-bailout conservative party is the favourite to win the Presidential elections on 17 June. This increases the likelihood that Greece will try to remain within the Eurozone.

No major economic data will be issued in the U.S tonight due to the Memorial Day public holiday. Markets will be closed in North America to remember the men and women who died while serving the U.S armed forces.

Looking ahead, Friday will be the busiest day of the week offshore due to major economic news in both China and also the U.S. The two major monthly manufacturing reports will be issued in China throughout the day. This includes the HSBC numbers, which is a representation of the small and medium sized Chinese businesses. The official government manufacturing report will be out earlier at 11am (AEST) and is expected to fall from 53.3 down to 52.1. Any number above 50.0 indicates improving conditions and industry expansion.

Volume of shares traded came in at 1.3 billion today, worth $3.38 billion. 530 shares were up, 389 were weaker and 370 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down 0.15 pct or 6 pts to 4059.

Due to daylight savings, most major European markets are now trading between 5pm (AEST) and 1.30am (AEST). Stocks are likely to perform well tonight.

Tonight is Memorial Day, so U.S markets will not be trading. 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) has strengthened against the greenback and buys US98.4 cents. The AUD is trading at £62.8 pence and €78.3 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.

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