Australian Stock Market Report – Afternoon 7/11/2012

AFTERNOON REPORT
(5pm AEST)

The Australian share market closed marginally in the red today, its fifth consecutive session of losses, although volumes were very low. Falls on offshore markets overnight contributed to the negative mood, although there was some buying in retail related stocks on the back of a pick-up in consumer sentiment. The All Ordinaries Index (XAO) finished the day's trade at 4135, down 3pts or 0.1pct.

Overnight profit warnings from US companies compounded worries of an already slowing economy, sending US stocks into the red. Industrial stocks were amongst the worst performers. European share markets managed some gains although volumes were once again very low. Around the Asian region today there was mixed movement.

Energy stocks were the worst performers locally, with the oil price subdued, under US$84 a barrel after Norway's government ordered an end to an oil worker's strike. Shares in Oilsearch (OSH) today fell 1.6pct to $6.37 while Woodside Petroleum (WPL) was off 0.5pct to $30.42.

Consumer confidence spiked in June, thanks to the recent round of interest rate cuts and a fall in fuel prices. Retail related stocks generally performed well, with surf wear retailer Billabong (BBG) up 2pct to $1.05 and Flight Centre (FLT firmer by 2.2pct to $20.63. Consumer staples stocks such as Woolworths (WOW) and Wesfarmers (WES) also gained. WOW increased by 0.2pct to $27 while Wesfarmers added 1.1pct to $30.28. JB Hi-Fi (JBH) however closed down 2.1pct to $8.82.

Elsewhere financial stocks were generally positive. The big four banks all posted gains, with Westpac (WBC) the best performer, up 1.2pct to $21.82. Macquarie Group (MQG) fell 0.6pct to $25.32.

Amongst the big miners, BHP Billiton (BHP) finished down 0.5pct to $31.05 while Rio Tinto (RIO) closed down 0.8pct to $55.65, both dragged lower by weaker commodity prices.

Telstra (TLS) shares continued their dream run, buoyed by investors looking for defensive stocks in the current downturn and thanks to its solid dividend re-investment. Shares in TLS added a further 1.3pct today or $0.05 to $3.86, a fresh three and a half year high.

Economic data released today showed consumer confidence rose by just 3.7pct in July to a reading of 99.1. Any reading below 100 suggests consumers are more pessimistic than optimistic. Sentiment levels are up 6.8pct on a year ago.

All five components of the index rose in July. The largest increase was registered in respondent's views on "economic conditions over the next 12 months" up by 5.8pct in July.

Meanwhile, the number of new owner-occupier housing loans fell by 1.2pct in May. The value of all home lending fell by 1.4pct with owner-occupier loans up by 0.2pct and investment loans down 4.6pct. Fixed rate loans accounted for 12.3pct of all loans in May. The average home loan across Australia stood at $293,600, down 2.3pct on a year ago.

"The Reserve Bank would have hoped that the deep rate cut would have provide a positive shock to confidence and be a catalyst to drive activity .... it seem to be having the desired effect," said CommSec Economist Savanth Sebastian of the data. "The June quarter inflation data at the end of the month should provide the Reserve Bank with further confirmation that inflation remains contained - opening the door to for a further rate cut in August."

The Euro's fall against the greenback continues to support the Aussie dollar's relationship with the Euro. At 5pm AEST the Aussie was buying €83.39c, an all-time high. The Aussie was also worth £65.84 and US102.28c.

On the market overall, a total of 1.42 billion shares were traded, worth $3.32 billion. 342 were up, 499 were down and 342 were unchanged.

At 5pm AEST the future market was at 4063, down 2pts.

Ahead tonight, the US FOMC minutes are handed down along with wholesale inventories and trade data.

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