Australian Stock Market Report – Afternoon 7/25/2012

AFTERNOON REPORT
(4.45pm AEST)

Local stocks ended slightly lower today, recovering from heavy losses earlier in the day on the back of a tame inflation report. The core inflation data (CPI) was released today, showing a 0.5pct rise in the June quarter, for an annual increase of 1.2pct, showing inflation in Australia is well and truly contained. By close, the All Ordinaries Index (XAO) was down 9.8pts or 0.2pct to 4151.4, off its earlier lows of 4114pts.

Energy players and industrial stocks were amongst the worst performers, with both sectors down 0.7pct.

The financial sector also finished lower, weighed down by losses from Macquarie Group (MQG). The Australian investment bank today struck up an upbeat tone for the year ahead, despite saying weak market conditions had impacted its first quarter. Pre-tax profit in the three months to June 30 was lower than in the final quarter of fiscal 2012 but higher than in the same period a year earlier. However MQG expects an improved result for the full 2013 financial year so long as market conditions don't worsen. MQG shares today fell 1.8pct to $23.87, with the overall financial sector down 0.3pct.

Elsewhere stocks which have been heavily sold off in recent sessions enjoyed a bit of a comeback. Iron ore miner Fortescue Metals Group (FMG) added 1.7pct while gold miner Newcrest (NCM) firmed by 4.6pct to $22.15.

Property developer Stockland Group (SGP) is on the lookout for a new CEO. Matthew Quinn has announced he will retire in 2013, after 11 years in the top job. SGP also today shaved its earnings guidance due to one-off restructuring costs. SGP shares fell 0.6pct to $3.18.

The Consumer Price Index, the main measure of inflation in Australia, rose by 0.5 per cent in the June quarter, in line with expectations. In seasonally adjusted terms the CPI rose by 0.6 per cent. The CPI stands just 1.2 per cent higher than a year ago - the lowest rate in 13 years.

Underlying inflation rose 0.5 per cent over the quarter to be up 1.9-2.0 per cent on the year - the weakest reading since 1999. The Reserve Bank monitors three measures to derive the underlying inflation rate. The trimmed mean rose by 0.5 per cent in the June quarter; the weighted median rose by 0.7 per cent and the CPI less volatile items rose by 0.4 per cent.

The low inflation reading ensures that the Reserve Bank can afford to cut rates and support confidence over the next couple of months. CommSec expects rates to be cut by a quarter of a per cent over the next few months. The timing of the move will be dependent on the evolving European crisis.

The Australian dollar ended the day's trade at US102.25c, £0.6596 and €84.75c.

On the market overall, a total of 1.22 billion shares were traded, worth $3.52 billion. 334 were up, 543 were down and 350 were unchanged.

At 4.30pm AEST, the SFE 200 Futures market was at 4081, down 4 pts.

Ahead tonight, new home sales data is released in the US. Caterpillar, PepsiCo and US Airways report earnings.

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