Australian Stock Market Report – Afternoon 7/16/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket improved for the second consecutive trading session, with the All Ordinaries Index (XAO) up 0.6 pct or 24.9 pts to 4143.2. This is the first time this month that shares have recorded two straight days of gains. Despite the improvement, today was yet another extremely quiet day for local markets (one of the quietest sessions of the year). This was partly due to a public holiday in Japan. The Tokyo Stock Exchange is considered to be the world's fourth largest stock exchange.

Global markets rose strongly on Friday, due to Chinese economic data not disappointing investors.

One of the standouts on the Australian sharemarket today was Whitehaven Coal (WHC). Its share price jumped by 17.97 pct or 62 cents to $4.07 after Australia's richest man under 40, Nathan Tinkler made a $5.3 billion bid for the company. Mr Tinkler's bidding business will now carry out due diligence over the next four weeks. WHC shares are still down by around 17 pct this year (since January 2012).

WHC was first listed on the ASX back in 2007 and is a NSW based coal producer and currently has a market capitalisation (number of shares on issue multiplied by the current share price) of $4.12 billion. It has a number of developments in the Hunter Valley, Queensland and the Gunnedah Basin in NSW.

The world's largest miner, BHP Billiton (BHP) rose 0.95 pct or 29 cents to $30.77 while the smaller Rio Tinto (RIO) gained 0.76 pct or 41 cents to $54.49. Over the week, BHP, RIO, Woodside Petroleum (WPL), Santos (STO) and Fortescue Metals (FMG) will all be issuing their latest quarterly production reports. On Wednesday, Australia's biggest supermarket chain, Woolworths (WOW) will announce its quarterly sales numbers.

Three of the four major banks finished higher, with National Australia Bank (NAB) the only exception after easing by 0.42 pct or 10 cents to $23.50. ANZ Banking Group (ANZ) rose 0.58 pct or 13 cents to $22.48, Commonwealth Bank (CBA) improved by 0.54 pct or 29 cents to $54.06 and Westpac (WBC) rose by 0.5 pct.

Australia's largest poultry producer, Inghams is now up for sale after 94 years in business. Bob Ingham is the long standing sole shareholder in the company and said just how difficult of a decision it was to put the business up for sale. Ingham made around $2 billion in sales in the 2012 fiscal year, has more than 8,000 staff and has production facilities in both New Zealand and Australia. This also comes just a week after iconic chocolate brand; Darrell Lea went into voluntary administration.

On the economic front today, a report showed that the average price of unleaded petrol at the pump increased last week for the first time in nine weeks. The national average pump price rose by 0.5 cent to 134.4 cents a litre. Unfortunately for motorists, Commsec expects pump prices (average price) to rise by as much as 5 cents a litre within the next fortnight.

Commsec's Chief Economist, Craig James said that "Motorists probably thought the good times couldn't last for ever, and they were right. After hitting the lowest levels in around 18-months, the price of petrol is again on the increase. The Singapore gasoline price has risen around 10 cents a litre from the lows. Australia's wholesale petrol price has risen around 6 cents a litre but the retail price has risen less than a cent a litre. Clearly everyone can do the maths. In the short-term, pump prices could rise around 5 cents a litre and eventually the increase could be as much as 10 cents a litre."

Mr James also went into some of the reasons for the sudden rise in prices. He said "The reason for the increase in oil prices? Stability. The European Debt Crisis has settled again, at least for now. In addition, investors are hopeful of stronger Chinese economic activity. And there is more optimism on the outlook for the US economy. Motorists in mainland capital cities should expect to see pump prices between $1.30 and $1.50 a litre rather than $1.15-$1.35."

Total lending continues to be volatile after falling by 7.3 pct in May. This effectively wiped out the solid gains recorded in April. Lending in the business world (commercial lending) slumped the most and fell by 12 pct. Mr James said that "There are encouraging signs that consumers and businesses are starting to borrow again. But the signs aren't definitive. The only area of lending growing strongly at present is lease finance as businesses embrace low interest rates and try to preserve cash flow."

Mr James also took the time to dissect some of the results from the 2011 Census and came up with some interesting statistics. It was no big surprise that Western Australian towns dominate the rich list. He said that "Before the mining boom it was a fairly easy exercise to determine the regions with highest incomes. The high income areas were generally found in northern or eastern Sydney and the inner suburbs of Melbourne. But now Western Australia dominates the regions of highest median personal income. Overall the top 13 regions for highest median personal income are in Western Australia. The postcode with the highest median personal income is 6710 - towns including Cane, Onslow and Peedamulla in Western Australia. The median weekly personal income of the 2,379 residents in the postal area was $2,000 or $104,000 a year."

Markets in Asia finished mixed today, with shares in China's Shanghai Composite index falling by 1.53 pct or 33 pts to 2152. The Japanese sharemarket was closed due to the Marine Day public holiday. The Tokyo Stock Exchange is considered to be one of the world's largest markets.

As many as 100,000 people were expected in Tokyo to rally against the recommencement of nuclear power in Japan. All 50 nuclear power plants in Japan have been closed for a lengthy period of time following the natural disasters in March last year, in particular with the meltdown scare at the Fukushima Daiichi Power Plant. You would be hard pressed finding a company that has performed as badly as Tokyo Electric (the owner of the power plant).

Tokyo Electric Power (9501;jp) has fallen by 70.8 pct over the past 12 months. All companies listed on the Japanese sharemarkets (and the majority of other markets in Asia) have numerical stock codes.

In Europe tonight, the latest inflation reading will be issued along with the region's trade balance. Prices are expected to have jumped by just 2.4 pct for the year.

Later on this evening, the International Monetary Fund (IMF) is scheduled to update global growth forecasts, just before midnight (AEST) tonight.

On Wednesday, the latest British job numbers will be issued, with the unemployment rate likely to stay steady at 8.2 pct.

In the U.S, the latest manufacturing report will be issued, in addition to the June reading for retail sales. The reporting season will pick up some pace this week, with 13 major companies issuing their second quarter (April to June) profit results tonight, including Citigroup (C;us).

Looking ahead to the rest of the week, Thursday will be the busiest day of the week for profit results in the U.S with over 120 companies releasing profit numbers. Over the next five days, we will hear from Harley-Davidson, Coca-Cola, Goldman Sachs, Intel, Yahoo!, IBM, eBay, AMEX, YUM!, Microsoft and General Electric to name just a few.

Volume of shares traded came in at 1.14 billion today, worth just $2.88 billion. 503 shares were up, 356 were weaker and 352 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down just 0.02 pct or 1 pt to 4071.

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 to trade.

U.S futures are pointing to a weaker start to trade tonight. 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 last Friday. The AUD buys US102.2 cents, is trading at £65.7 pence and €83.6 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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