Australian Stock Market Report – Afternoon 6/13/2012

MARKET CLOSE
(4.30pm AEST)

After a stronger start to the day, the Australian sharemarket eased slightly with the All Ordinaries Index (XAO) falling 0.2 pct or 6.8 pts to 4111.5. The volume of shares traded remained a little light ahead of the all-important Greek elections which will be held in just four days. Stocks were largely evenly split between gains and losses.

Yesterday, the miners were the worst performers and today the sector struggled to keep its head above water. The S&P/ASX 200 Materials index rose 0.12 pct or 11.2 pts to 9631. The world's largest miner, BHP Billiton (BHP) rose 0.63 pct or 20 cents to $31.92 while the smaller Rio Tinto (RIO) eased by 0.09 pct or 5 cents to $54.60. BHP has won the right to prospect a number of areas around its Olympic Dam mining operations in South Australia. The company still has to decide if it will go ahead with the expansion of the mine (could cost the company as much as $30 billion). Olympic Dam is the site of a huge copper, uranium and gold mine.

The four major banks all ended in the red today, with ANZ Banking Group (ANZ) the worst after losing 0.92 pct or 20 cents to $21.57. Commonwealth Bank of Australia (CBA) and Westpac (WBC) both ended 0.39 pct lower while National Australia Bank (NAB) eased by 0.32 pct. WBC board member, Carolyn Hewson has said she will step down from her position as board member for the bank after nine years of service (the maximum period possible to serve). She also sits on the boards of BHP and property group, Stockland.

Qantas (QAN) continued to improve for the second straight day, with its shares up 2.33 pct or 2.5 cents to $1.10. On Tuesday, its shares jumped by close to 11 pct. Keep in mind that QAN shares slumped by 33 pct last week following a significant profit downgrade announced by Australia's largest airline.

Whitehaven Coal (WHC) rose 4.5 pct or 18 cents to $4.18 today and was one of the better performers. The miner confirmed it had received a takeover offer from a group controlled by Australia's richest person under 40, Nathan Tinkler. In a statement, the company said that the current offer is only in its early stages and can't progress further at this point. WHC has setup a team to consider any future developments which may arise.

On the economic front today, the latest consumer sentiment index improved modestly. Considering the survey was conducted after the June rate cut (the second month of cuts in a row), better than expected growth figures and a solid employment report, the result was a little disappointing.

Commsec Economist, Craig James said that "There were few surprises in the monthly reading on consumer confidence - the Roy Morgan weekly survey had already been released on Tuesday and it showed only a modest lift in consumer spirits. And that is despite a rate cut, good reading on economic growth and solid rise in employment in the latest month. It is clear that some good domestic news was no match for continued gloom about Europe, a volatile sharemarket and weaker Aussie dollar. If there was one surprise it was on the outlook for personal finances in a year's time. The index plunged 7.7 per cent in June to the lowest reading in almost 22 years (since December 1990). Certainly it was the lowest reading since the last recession. Why the gloom about finances? The only identifiable factors are the carbon tax and the European Debt Crisis. Presumably people are worried about what the carbon tax means for their household budgets. There may also been some angst about Europe and whether the sharemarket will recover. But other factors like rate cuts and higher wages are positive for personal finances."

Tomorrow, the latest detailed statistics on the labour market will be released for the month of May. New Zealand's central bank will be meeting in the morning to make a decision on interest rates. The market is expecting rates will remain on hold at 2.5 pct for the 10th straight month. The central bank's governor will be testifying in Wellington.

Germany is expected to hold a 10-year bond auction tonight.

It will be a busy session in the U.S with a number of economic readings set for release. The latest retail trade, producer prices and business inventory reports will all be issued overnight. There will also be a reading on crude oil inventories, which measures the change in the number of barrels of crude held at commercial firms around the U.S at the end of last week. This has the potential of moving oil prices a touch and can impact Canada's energy sector and currency. A 10-year bond auction is also expected to be held in the U.S tonight.

Volume of shares traded came in at 1.56 billion today, worth $3.59 billion. 411 shares were up, 587 were weaker and 379 ended unchanged. It was almost 10 pct quieter on the Aussie market today than yesterday.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.12 pct or 5 pts to 4071.

Due to daylight savings, most major European markets are now trading between 5pm (AEST) and 1.30am (AEST). Futures are currently pointing to a stronger start to trade.

U.S futures are pointing to a weaker start 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) currently buys US99.7 cents and is edging its way closer to parity against the greenback. The AUD is buying £64.05 pence and €79.61 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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