Australian Stock Market Report – Afternoon 7/13/2012

MARKET CLOSE
(4.30pm AEST)

There was nothing frightening about Friday 13th, with sharemarkets improving for the first time in seven trading days thanks to economic news out of China not surprising investors. The All Ordinaries Index (XAO) rose by 0.3 pct or 12.3 pts to 4118.3. The XAO is one of the main ways to measure market performance in Australia. Despite today's gains, shares locally have slumped by 1.7 pct over the past five days, are only a touch weaker so far in July and are flat in the 2012 calendar year.

Nine of twelve market sectors improved today, with the financial sector the biggest positive driver for equities (shares). Westpac (WBC) was the best of the majors after rising 0.82 pct or 18 cents to $22.05. ANZ Banking Group (ANZ) jumped by 0.77 pct or 1 cents to $22.35, National Australia Bank (NAB) gained by 0.6 pct or 14 cents to $23.60 while Commonwealth Bank of Australia (CBA) rose by 0.49 pct or 26 cents to $53.77.

The mining sector managed to improve for the first time this week; however the energy players ended flat. BHP Billiton (BHP) rose by 0.26 pct or 8 cents to $30.48, Rio Tinto (RIO) eased by 0.31 pct or 17 cents to $54.08, Fortescue Metals (FMG) slumped by 1.95 pct or 9 cents to $4.53 and oil and gas producer Woodside Petroleum (WPL) ended unchanged to $30.30.

Yesterday, Myer (MYR) announced 100 job cuts due in part to higher costs and conservative shoppers. Today, the department store owner rose by 0.6 pct or 1 cent to $1.67 but still fell by around 8.5 pct over the week.

Australian energy company, Origin (ORG) dropped by just 0.08 pct or 1 cent to $12.01 despite news that the upgrade of its gas project in Bass Strait has encountered some problems.

It certainly has been quiet an eventful week on the news front in Australia. Chocolate maker Darrell Lea went into voluntary administration and Brisbane won the rights to host the G20 Summit in 2014. The Australian government is supposedly setting aside $370 million to pay for the event. Offshore, the European Finance Ministers met in Brussels and South Korea cut interest rates for the first time in three year.

No major economic news was issued in Australia today, however the Reserve Bank's Deputy Governor delivered a talk.

The local market was treading water ahead of a number of economic reports out in China. In fact, today was the busiest day of the month for economic news in the world's second largest economy. Its economy grew at an annual pace of 7.6 pct in the June quarter, which was largely in-line with the market's latest expectations. Note that the market's forecasts can change leading up to the release. This was still the slowest growth rate for China in three years.

Its industrial production expanded by 9.5 pct over the same period and was slightly worse than most market forecasts. This measures the change in the total output produced by manufacturers, utilities and mines.

Retail spending has jumped by 13.7 pct over the previous quarter (annual pace) which was a little better than what the market was hoping for. With a relatively modest pullback in growth and with inflation under control, Chinese officials would feel more comfortable in stimulating the economy over the next few months.

There will be no major economic news released in Europe tonight; however it will be significantly busier in the U.S. The latest consumer sentiment (confidence) report will be issued 30 minutes into the American trading session, along with producer prices (business inflation) and a speech by a U.S Federal Reserve official.

Next week will be a little more subdued on the economic front in Australia, with a report on building activity, news on imports and exports along with the minutes from the Reserve Bank's July meeting some of the highlights. A few Annual General Meetings (AGMs) will be held and some of Australia's largest miners will be releasing their quarterly production reports, including BHP, RIO, WPL and FMG. In the middle of the week, Australia's largest supermarket chain, Woolworths (WOW) will be issuing its fourth quarter sales numbers.

In the U.S, the profit reporting season will pick up some steam with hundreds of companies announcing their profit results. Next Thursday for example, Morgan Stanley, Nokia and Microsoft along with over 115 other companies are due to issue numbers.

Volume of shares traded came in at 1.32 billion today, worth just $3.55 billion. 444 shares were up, 414 were weaker and 348 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.27 pct or 11 pts to 4049.

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 better start to trade tonight also. 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 a little stronger than this time yesterday. The AUD buys US101.5 cents, is trading at £65.8 pence and €83.3 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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