Australian Stock Market Report – Afternoon 6/27/2012

MARKET CLOSE
(4.30pm AEST)

We all know that time apart makes the heart grow fonder. Based on this thinking, investors should have celebrated today due to markets improving for the first time in five trading days. The mining sector lost a little ground, however all other regions of the market recorded at least modest gains. The All Ordinaries Index (XAO) ended 0.7 pct or 27.7 pts in the back to 4084.

The world's largest miner, BHP Billiton (BHP) eased by 0.1 pct or 3 cents to $30.60 while Rio Tinto (RIO) fell by 0.47 pct or 26 cents to $55.08. Australia's largest gold producer, Newcrest Mining (NCM) slumped by 1.8 pct or 40 cents to $21.85. BHP has snapped up additional prospecting rights in the area surrounding its huge Olympic Dam site in South Australia.

NewsCorp (NWS) has said it would consider splitting its business into two. The idea behind this would be to separate its publishing division from its stronger entertaining operations. NWS shares improved for the second straight day and ended 3.42 pct or 71 cents higher to $21.50. NWS has jumped by close to 20 pct this year and gained by more than 11 pct last year despite the phone hacking scandals.

Fairfax (FXJ), the owner of The Financial Review and BRW has apparently covered some of its potential changes to its business with staff by distributing an explanatory booklet to employees. FXJ shares rose 0.91 pct or 0.5 cent to 55.5 cents, however is down by 22.9 pct so far this calendar year.

The four major banks improved today, with Westpac (WBC) the best of the bunch after rising 1.21 pct or 25 cents to $20.92. Despite flirting with lower ground for much of the morning, ANZ Banking Group (ANZ) gained by 1.13 pct or 24 cents to $21.54, National Australia Bank (NAB) improved by 1.04 pct or 24 cents to $23.38 while Commonwealth Bank (CBA) rose by 0.87 pct or 45 cents to $52.15.

Australia's largest specialty retailer, Harvey Norman (HVN) said that the higher Australian Dollar (AUD) is driving down prices, but also driving down its revenue. HVN shares rose 1.87 pct or 3.5 cents to $1.90 today.

No major economic news was issued in Australia, however tomorrow will be significantly busier on that front. The latest data on financial accounts is scheduled for release. This will include information on household wealth. An update on job vacancies in Australia and a report for the number of homes sold last month will be issued.

In the region today, shares in South Korea are a touch lower but almost all other sharemarkets are improving. Both markets in Hong Kong and the Philippines are the best. No major economic news was released in Asia Pacific however Japan's lower house voted in favour of a controversial piece of legislation to double the nation's consumption tax from 5 pct to 10 pct by 2015. It has also voted to increase the tax to 8 pct over the next two years. The idea behind this is to attempt to reduce its deficit. Tomorrow morning, the latest retail sales report will be released in Japan.

No major economic news will be issued in Europe tonight, however leaders will be preparing themselves for tomorrow's European leader summit. Rumours and speculation have been significant ahead of this meeting. Italy's unelected Prime Minister, Mario Monti has allegedly threatened to resign (although he denied this) if Eurobonds are not introduced. In stark contrast, Germany's Chancellor Angela Merckel has made it quite clear that as long as she is leader, the idea of Eurobonds will not come to fruition.

Eurobonds is a way for the 17 Eurozone nations to issue debt/bonds that are underwritten (guaranteed) by all nations within the Euro Area. This would likely see the borrowing costs for struggling nations such as Greece, Spain, Portugal and Ireland fall because they would be covered by the stronger nations such as Germany and France. On the flipside however, the borrowing costs for nations such as Germany would rise from current levels due to the additional risk of the weaker states. This is one of the reasons why the Germans have been against the idea. At the moment, each Eurozone nation has separate borrowing costs (the more unstable the economy, the higher its interest rates/cost of borrowing).

In the U.S, a report on durable goods and pending home sales will be issued for May. The latest report on crude oil inventories will also be out. Last week, the report showed that oil inventories were at their highest levels since 1990. This was part of the reason why oil prices pulled back to below US$80 a barrel.

Volume of shares traded came in at 1.76 billion today, worth $3.55 billion. 512 shares were up, 498 were weaker and 421 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.07 pct or 3 pts to 4015.

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.

U.S futures are pointing to a largely flat 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) is largely unchanged against the greenback. The AUD is trading at US100.5 cents, £64.3 pence and €80.4 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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