Australian Stock Market Report – Afternoon 8/14/2012

AFTERNOON REPORT
(4.30pm AEST)

Local stocks managed a small win today, despite a negative lead from the US Dow Jones Index and as European shares eased from four month highs. Defensive stocks led the gains locally, with the All Ordinaries Index (XAO) adding 7.9pts or 0.2pct by close to finish at 4317.

Banking stocks were generally lower after the National Australia Bank's (NAB) third quarter trading update missed expectations. NAB announced a weaker than expected profit of $1.2 billion in the three months to June, with revenue down due to higher funding costs and weaker financial markets. NAB shares today closed down 1.4pct to $24.70. ANZ (ANZ) shares also lost ground, falling 0.2pct to $23.76 while the Commonwealth Bank (CBA), which releases its full year results tomorrow, fell 0.3pct to $55.54. Westpac (WBC) bucked the trend, rising 0.7pct to $23.66.

Mining stocks were generally lower, with Australia's largest listed gold producer Newcrest Mining (NCM) coming off yesterday's highs in the wake of its profit result. Shares in NCM fell 0.9pct today to $25.18, with many in the market disappointed in NCM's failure to announce a special dividend to shareholders. Index leader BHP Billiton (BHP) finished the day's trade slightly firmer at $32.95, while rival Rio Tinto (RIO) fell 0.1pct to $56.52 and Fortescue Metals Group (FMG) was down 1.8pct to $4.40.

One of the best performers on the market today was Telstra (TLS), as investors switched back into the defensive players. TLS shares rose 2.7pct to $3.83. The company is set to pay a 14c per share dividend on the 20th August. Meanwhile the owner of the Optus network, Singapore Telecommunications (SGT), closed slightly lower at $2.55. The company today reported a 3.2pct increase in first quarter net profit to $945.3 million, however earnings and revenue at its Optus business were down in the three months to June.

Elsewhere today, food company Goodman Fielder (GFF) today posted another full year loss, and warned challenging trading conditions in the baking and spreads sector will continue. GFF posted a net loss of $146.9 million for the year to June 30, however the result is a 12pct improvement on 2011's $166.7 million loss. The result was impacted by one off pre-tax charges of $267.2 million relating to a restructure, plus previously flagged write-downs on its Australian and New Zealand baking business. GFF, whose brands include White Wings and Meadow Lea, will close a number of factories and make 600 jobs redundant as part of its restructure. GFF shares rose 8.2pct to $0.53 today, with investor's impressed that the company has managed costs, paid down its debt and strengthened its balance sheet over FY12. GFF will not be paying a dividend to shareholders.

Domino's Pizza (DMP) today reported a 26pct rise in FY profit thanks to stronger sales and rising store numbers. Net profit for the year came in at $26.9 million, up from $21.4 million in FY2011. Total sales came in at $805.3 million in the year to June, up 8pct from the previous year. Same store sales, which take out the impact of new stores on sales, grew by 6.5pct in the year to June. DMP shares today added 2.7pct to $9.65.

Economic data released today showed the NAB business confidence index rose from a reading of -2.9 to +3.9 in July, the first positive reading in three months. However business conditions deteriorated from a reading of -1.1 to -3.5. The survey of over 400 businesses took place from July 18 to July 31.

Across the sub-indices, trading conditions fell from +2.8 to -2.8; profitability worsened from a -1.2 to -6.6 to a three-year low; and forward orders improved from -6.9 to -3.6. but still marked the 16th straight month that forward orders have contracted.

Despite lower attractive interest rates, businesses were still unwilling to borrow. The proportion of firms reporting that they did not require credit rose from 63pct to 66pct in July.

The CommSec Car Affordability measure improved to the best levels since the 1970s. It now takes a worker on the average wage 27.5 weeks to purchase a new Ford Falcon.

Meanwhile new car sales fell by 0.8pct in July in seasonally adjusted terms after falling by 1pct in June. Sales of sports utility vehicles hit record highs in the 12 months to July.

The Roy Morgan Consumer Confidence Rating rose by 2.1 points last week to a 13 week high of 113.1 points. The weekly survey provides a regular, reliable gauge of consumer sentiment.

On the market overall, a total of 1.5 billion shares were traded, worth $3.46 billion. 401 shares were up, 456 were down and 346 were unchanged.

At 4.30pm AEST the futures market was at 4256, up 6pts.

The Australian dollar was buying US105.18c, £0.67 and €85.04c.

Ahead tonight, data on producer prices and retail sales are released in the US.

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