Australian Stock Market Report – Afternoon 6/14/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket ended in the red for the second day running, with the All Ordinaries Index (XAO) slipping by 0.5 pct or 21.7 pts to 4089.8. No sectors were spared from the selling today, with even the defensive telcos dipping into the red by close of business. TLS shares eased 0.28 pct or 1 cent to $3.60, however has gained by around 8 pct since the start of this year.

Commodity prices continued to feel the pressure overnight, with the Greek elections fast approaching (now just three days away). The world's biggest mining company, BHP Billiton (BHP) fell 0.38 pct or 12 cents to $31.80 while the smaller Rio Tinto (RIO) dropped 0.6 pct or 33 cents to $54.27.

The big four banks all lost ground, with Westpac (WBC) and ANZ Banking Group (ANZ) the worst performers today after losing close to 1 pct. National Australia Bank (NAB) fell 0.41 pct or 9 cents to $22.06 while the larger Commonwealth Bank of Australia (CBA) eased 0.1 pct or 5 cents to $50.57.

Despite the weakness, a number of companies still managed to improve today. Asset manager, Perpetual (PPT) jumped 9.94 pct or $2.15 to $23.79 following speculation it is being approached by private equity firms for a potential takeover. PPT had its best day in close to a year today.

Hutchison Telecommunications (HTA) was one of the worst of the day, with its shares slumping by 12.50 pct or 0.5 cent to 3.5 cents. HTA owns half of Vodafone Australia. Its shares have slumped by 43 pct this year. It has a market capitalisation of around $475 million, which makes it around 100 smaller than TLS (on the sharemarket).

On the economic front today, a detailed report on the state of the Australian jobs market was out. Last week, we found out that there were close to 40,000 jobs created in May which was well above expectations. Over the past three months, over 60,000 jobs were added. This made it the best quarterly growth since late 2010.

It is no secret that the mining sector is of upmost importance to the Australian economy and accounts for around 80 pct of all exports. When it comes to the job market however, the resource sector only account for around 2 pct of the Australian workforce. In contrast, the Healthcare sector employs around five times as many people.

Commsec Economist, Savanth Sebastian said that "The detailed labour market data has added further weight to the underlying strength in labour demand. Over 60,000 jobs were created in the three months to May - marking the best quarterly result since late 2010. Given all the media focus on high profile job losses in key industries like manufacturing, transport and housing, it is understandable that consumers are uncertain when it comes to job security. But the latest result paints a far different picture. Not only are businesses holding onto existing staff but they are are actively hiring new staff, positioning themselves for the pickup in growth and investment."

He went on to highlight that a number of sectors are still doing it tough. "Granted there are sectors that have been finding conditions difficult, and the data highlights the multispeed nature of the domestic economy. While an array of sectors were showing signs of improvement, job losses continued to gather pace in the manufacturing and construction sectors. In fact
the manufacturing sector has not recorded annual employment growth in nearly four years. The strength of the Australian dollar and higher comparative wages has resulted in the sector being less competitive on the global front."

Most markets in the region ended either a touch lower or largely flat today. New Zealand's central bank decided to keep interest rates steady for the 10th straight month as expected this morning. Indonesia and Thailand both kept rates on hold earlier in the week. Tomorrow, the Bank of Japan (Japan's central bank) will be holding its meeting on monetary policy. Rates in the world's third largest economy are likely to remain at virtually 0 pct for the 21st straight month. Interest rates have actually not been above 0.1 pct in Japan since December 2008. Most central banks meet once a month to decide what to do with interest rates (including Australia's Reserve Bank). The Bank of Japan (BOJ) however makes its decision twice a month.

Tonight in Europe, the European Central Bank's (ECB) monthly bulletin will be out at 6pm (AEST). This report reveals the statistical data (numbers) the ECB used to make its latest decision on interest rates earlier in the month. The data can give one an insight into potential future moves.

The latest inflation reading will also be issued in Europe, the Bank of England Governor will be speaking at 4am (AEST) and French President Francois Hollande will be meeting with the Italian leadership team. In Vienna tonight, the fifth OPEC International seminar will take place. This is a meeting where ministers from OPEC Member countries, heads of international oil companies, industry leaders, analysts and academics discuss pressing topics (and probably share a meal and drink).

In the U.S tonight, the latest inflation reading, weekly unemployment claims and 30-year bond auction will be held.

Volume of shares traded came in at 1.5 billion today, worth $3.01 billion. 366 shares were up, 595 were weaker and 385 ended unchanged. It was around 30 pct quieter today than last Thursday.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down 0.05 pct or 2 pts to 4042.

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

U.S futures are pointing to a stronger 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 US99.5 cents and is edging its way closer to parity against the greenback. The AUD buys £64.2 pence and €79.1 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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