Australian Stock Market Report – Afternoon 6/19/2012

MARKET CLOSE
(4.30pm AEST)

After a stellar start to the trading week, the Australian market lost a little ground today. The All Ordinaries Index (XAO) fell 0.4 pct or 16.5 pts to 4167.4. It was another quiet day on the market with only around $3 billion worth of shares exchanging hands today. When discussing markets, the negative seems to receive significantly more attention than the good. Yesterday, the XAO rose by around 1.9 pct thanks to the victory by a pro-Euro and pro-bailout party in the Greek elections.

Shares in Greece jumped by more than 3.5 pct, thanks to the risk of its imminent exit from the Eurozone easing. Overnight, the G20 meeting kicked off and will continue tonight. The Greeks have been working hard to attempt the formation of a coalition, something which it failed to do early last month.

10 of 12 market sectors lost ground today, with the defensive healthcare and consumer staple stocks the exceptions.

Four years after the class action kicked off, failed property group Centro has been given the okay for a $200 million settlement on a class action. Around 6000 investors will receive funds due to claims of being misled about Centro's debt situation. This makes it Australia's largest even class-action.

Unions met with a number of Fairfax workers today in both Melbourne and Sydney to discuss the expected job cuts. A company controlled by mining billionaire and the world's richest woman, Gina Rinehart is seeking three seats on the board of the company. Mrs Georgina Hope Rinehart and Hancock Prospecting Pty Ltd and its subsidiaries has an 18.7 pct stake in the business. Rinehart's wealth is around 1.5 times greater than Mark Zuckerberg's, the head of Facebook and around 10 times greater than Oprah's. FXJ shares fell 8.46 pct or 5.5 cents to 59.5 cents today following on from a 7.5 pct improvement yesterday.

The energy sector was one of the worst performing regions of the market, with Woodside Petroleum (WPL) down 1.65 pct or 55 cents to $32.71 while the smaller Santos (STO) eased by 0.67 pct or 8 cents to $11.94.

Mining giants BHP Billiton (BHP) and Rio Tinto (RIO) both ended a touch weaker. BHP fell 0.46 pct or 15 cents to $32.49 while the smaller RIO slid by 0.4 pct or 23 cents to $56.77.

Three of the four major banks gained ground, with National Bank (NAB) leading the improvements. NAB rose by 0.61 pct or 14 cents to $22.95, Westpac (WBC) edged higher by 0.19 pct, Commonwealth Bank (CBA) gained by 0.1 pct while ANZ Banking Group (ANZ) fell 0.55 pct or 12 cents to $21.68.

On the economic front, the minutes from this month's interest rate meeting were issued today. The Reserve Bank (RBA) said that its decision to cut interest rates was 'finely balanced'. In English, this means that the 0.25 pct cut at the start of June was a close call. Due to the delicate situation Europe finds itself in, Commsec expects rates to be cut by 0.25 pct in August.

Commsec Economist, Savanth Sebastian said that "The Reserve Bank Board members conceded that the ongoing Euro zone sovereign debt crisis was behind the decision to cut rates. "Recent domestic data generally had not suggested a significant weakening in conditions compared with the forecasts a month earlier. Moreover, there had not been time to assess the effects of the earlier reductions in the cash rate. However, there was clear evidence suggesting a softening in global conditions, and uncertainty about the future in Europe had increased significantly." Interestingly the minutes make mention of the general health of the domestic economy, with the recent round of domestic data "generally had not suggested a significant weakening in conditions". The Reserve Bank is well aware of the multi-speed nature of the economy however recent data on retail sales, labour market, mining investment and even business credit implied a "degree of resilience" in domestic activity. In fact in recent times policy officials have been at pains to highlight that any inherent weakness is more a confidence issue than as a result of significant structural weakness."

A number of economic reports will be out tomorrow. Firstly, Tony Richards, an RBA official will be delivering a talk. A quarterly report on dwelling starts will be issued for the March quarter (January to March). Starts are expected to fall by around 1.5 pct. Population data for the December quarter (October to December) will be announced. Population growth is one of the key drivers for growth. Australia's population has grown by 1.4 pct over the past year, which is one of the fastest growth rates in the developed world. Growth is likely to remain considerable over the quarter, due to continued demand for skilled migration.

No major economic news was issued in the region today. Thursday will be considerably busier, with the latest growth report released in New Zealand for the March quarter. The market is expecting the Kiwi economy to have expanded by 0.4 pct. The latest update on the health of China's manufacturing sector for small and medium sized businesses will also be announced.

It will be largely quiet in Europe tonight, however quarterly CPI (consumer inflation) will be issued at 6.30pm (AEST) in the U.K. The latest reading on the confidence of institutional investors and analysts in Germany will be out at 7pm (AEST). This is calculated by conducting a survey of around 400 Germans, asking them a variety of questions about their relative outlook on the future of the Eurozone economy.

In the U.S tonight, the Federal Reserve (the American equivalent of Australia's Reserve Bank) will be holding its monthly meeting on interest rates (day 1 of 2). No change to interest rates is expected until at least 2014; however the market will be watching closely for hints of future stimulus and comments surrounding the Eurozone.

Volume of shares traded came in at 1.4 billion today, worth $3.06 billion. 371 shares were up, 623 were weaker and 395 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.15 pct or 6 pts to 4134.

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 better start. 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 remained well above parity against the greenback following the Greek elections. The AUD is trading at US101.3 cents, £64.6 pence and €80.3 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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