Australian Stock Market Report – Afternoon 6/20/2012

MARKET CLOSE
(4.30pm AEST)

The performance of the Australian sharemarket continues to be heavily influence by offshore developments. Last night, most global markets improved strongly (up by as much as 2 pct). A Greek coalition seems close to being announced and there has been speculation the Europeans will use a chunk of their bailout funds to buy Italian and Spanish debt (no confirmation). The bad news for the Greeks is that they will need to face the Germans this Friday in the European football championships (a coincidence that the Eurozone's strongest economy is playing the regions weakest?).

News Corp (NWS) made a $1.97 billion offer for James Packer's Consolidated Media, which owns around 25 pct of Foxtel. NWS also announced plans to streamline its business. Amongst other things, it will cut the number of its divisions from 19 down to five along Australia's east cost (which accounts for ¾ of total sales). This comes just days after Fairfax (FXJ) announced a number of changes to its business including 1900 job cuts. NWS rose 0.55 pct or 11 cents to $20.15 while FXJ fell 0.84 pct or 0.5 cent to 59 cents.

Wholesale grocery distributor, Metcash (MTS) said it will take full control of hardware company, Mitre 10. MTS intends on giving a more detailed rundown in its full year profit results next week. MTS shares slumped 3.78 pct or 15 cents to $3.82.

The big four banks all improved today, with National Australia Bank (NAB) up 2.18 pct or 50 cents to $23.45. Westpac (WBC) jumped by 1.92 pct or 40 cents to $21.20, Commonwealth Bank (CBA) rose by 0.97 pct while ANZ Banking Group (ANZ) edged higher by just 0.32 pct or 7 cents to $21.75.

The world's third largest miner, Rio Tinto (RIO) said it will commit $4.2 billion to the expansion of its iron ore business, with around $3.7 billion to be spent in the Pilbara region of Western Australia. The larger BHP Billiton (BHP) rose 0.34 pct or 11 cents to $32.60.

On the economic front, a report has shown that Australia's population and the number of properties being built are heading in different directions. There was a 24.5 pct fall in newly built homes in the 2011 calendar year, while the country's population rose by 1.4 pct or 302,000 over the same period. This makes it one of the advanced world's fastest growth rates. There are now around 22.5 million people living in Australia.

Commsec Economist, Savanth Sebastian said that "The latest dwelling commencement data paints a picture of a housing sector that is effectively going nowhere. Activity levels have dried up with potential home buyers remaining on the sidelines. However the catalyst for a modest improvement in building should come from the recent rate cuts. Given the significant impact that housing has on an array of other sectors, resurgence in housing activity will be needed to support broader economic growth over the coming year."

Mr Sebastian also commented on today's population report, saying that "Australia's population growth rate has picked up pace over the latter part of 2011 and it does seem like it is poised to improve underpinned by a robust migration program. For any business this is clearly good news. If there are more people coming to live and work in Australia, it means more spending, investment, employment and thus momentum for the economy. Robust skilled migration will be the key driver over the coming year, especially given the likely labour shortages as the businesses ramp up investment plans. It is important that the Government carefully watches skilled labour demand and is responsive in lifting migration targets when necessary. Simply, more migrants means more demands for housing, food, clothing and a raft of other consumer items. And that surge in population growth gave the economy valuable momentum. It is momentum that we could do with now."

Tomorrow, the results from the 2011 Census will be issued along with the Reserve Bank's (RBA) quarterly bulletin, which contains articles on a number of household spending indicators.

In the region, most sharemarkets ended higher, with shares in Japan gaining by 1.1 pct despite disappointing economic news. Stocks in South Korea improved by 0.65 pct, Hong Kong's Hang Seng edged higher by 0.55 pct, while shares in New Zealand slumped by 1.02 pct following some disappointing economic news.

Japan recorded its 14th straight trade deficit as it continues to struggle following the 2011 natural disasters and nuclear troubles.

In Europe tonight, the latest minutes from the Bank of England's (BOE) interest rate meeting will be issued along with the U.K's unemployment rate which is likely to remain at 8.2 pct.

Tonight marks day two of the Federal Reserve's (the U.S equivalent of Australia's Reserve Bank) interest rate meeting. Keep an eye on any hints of further stimulus or the potential of operation twist (basically when the central bank sells short-term debt and replaces with long-term debt).

Volume of shares traded came in at 1.89 billion today, worth $5.66 billion. 487 shares were up, 505 were weaker and 401 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.15 pct or 6 pts to 4135.

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

U.S futures are pointing to a weaker start to trade. 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 and has improved over the past 24 hours. The AUD is trading at US101.8 cents, £64.8 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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