Australian Stock Market Report – Afternoon 8/15/2012

AFTERNOON REPORT
(4.30pm AEST)

The Australian sharemarket eased a touch for the first time this week, with the All Ordinaries Index (XAO) falling 0.2 pct or 10.4 pts to 4307. The mining sector was the biggest drag on trade, with the S&P/ASX 200 Materials index slumping by 1.35 pct or 131.2 pts to 9620.7.

Australia's third largest iron ore producer, Fortescue Metals Group (FMG) fell by 4.55 pct or 20 cents to $4.20, while the smaller Rio Tinto (RIO) dropped 2.51 pct or $1.42 to $55.10. The world's biggest mining company, BHP Billiton (BHP) fell by 1 pct or 33 cents to $32.62.

There was very limited movement from global sharemarkets last night, with little to surprise investors. The German economy grew slightly between April and June, France is treading water and the broader Eurozone is shrinking a touch. Germany makes up around a third of the Euro Area's total economy.

The profit reporting season continues, with a number of big name stocks announcing their half yearly or annual earnings results. Westfield (WDC), one of the world's biggest shopping centre owners, announced a 31 pct rise in profit to $800 million between January and June this year. Revenue fell however, with trading conditions remaining difficult. The company announced a $0.2475 distribution per security, which is a slight rise on this time last year.

WDC has significantly outperformed the rest of the market and has jumped by 23 pct this year (since January 2012). However; it has had a tough run leading up to this year, with its shares slumping by 61 pct between 2008 and 2011.

Pathology provider, Primary Healthcare (PRY) announced a close to 50 pct rise in its Full-Year profit and forecast a rise in earnings for the following year. PRY was first listed in 1998, has its headquarters in Sydney and recorded its best daily improvement of the year. Its shares rose 9.87 pct or 30.5 cents to $3.40.

Commonwealth Bank of Australia (CBA) recorded a $7.1 billion profit for the 12 months to June 30, and improved most significantly of the majors today. CBA shares rose 0.92 pct or 51 cents to $56.05, while Westpac (WBC) edged higher by 0.08 pct or 2 cents to $23.68.

National Australia Bank (NAB) shares continue to underperform after announcing a lower than expected, quarterly profit result yesterday. NAB shares fell 1.78 pct or 44 cents to $24.26. Since the start of this calendar year, WBC has improved by 18 pct, ANZ Banking Group (ANZ) is up 14 pct, CBA has strengthened by 13 pct and NAB is trailing behind with a 3.85 pct rise since January.

Casino operator, Echo Entertainment (EGP), recorded a $42.2 million profit for the year, with its bottom line hurt by higher expenses. EGP split from Tabcorp in June last year. It owns Sydney's, The Star, which made up around 65 pct of the group's total profit alone. EGP shares fell 2.75 pct or 11 cents to $4.07, however is 18 pct higher this calendar year.

On the economic front in Australia today, the August reading on consumer sentiment (confidence) was issued at 10.30am (AEST) and recorded a 2.5 pct slide following a 3.7 pct improvement in confidence in July. This was following a report yesterday, released by a different group, recording a 2.1 pct gain in improvement this month.

CommSec's Chief Economist, Craig James said that "The two measures of consumer confidence appear to have diverged in the latest month. But we shouldn't get too hung up on the actual numbers. Looking at the big picture, the story is that consumers can be best described as ambivalent. Some consumers are feeling OK, others are still jaded, but broadly confidence levels are neutral. The outlook for retailers is mixed. Consumer confidence is OK without being great, but wages are rising at a faster rate than prices. Add in the fact that unemployment is low, interest rates could be cut again, home prices are lifting gradually, the sharemarket has stabilised and the Aussie dollar is strong. Overall, consumers need to be positive about their finances before retailers can become more confident on future spending."

The main, quarterly report on wage growth was issued at 11.30am (AEST) and showed that wages grew by 1.0 pct between April and June this year. This is the main measure of wage growth and was largely in-line with market expectations.

Mr James said that the "Industries with fastest annual wage growth: Mining (up 5.2 per cent), Wholesale trade (up 4.8 per cent); Professional, scientific and technical services (up 4.5 per cent) and Construction (up 4.2 per cent). Industries with slowest annual wage growth: Health care and social assistance (up 2.6 per cent); Retail trade (up 2.7 per cent); and Accommodation & food services (up 3.4 per cent)."

There was no market moving economic news issued in the region today, nor will there be for the remainder of the week. Shares across the majority of markets across Asia-Pacific lost some ground today, with the exception of New Zealand, with shares edging high by 0.6 pct.

Tonight, the Bank of England's (BoE) minutes will be issued at 6.30pm (AEST) from the latest central bank meeting earlier this month. Also at the same time, we will find out if the U.K's unemployment rate remains steady at 8.1 pct, which is expected. Australia's jobless rate is almost 3 pct lower than the U.K's.

In the U.S last night, retail spending rose at approximately twice the expected rate and recorded the biggest gain in spending since February this year. Tonight, the Consumer Price Index (CPI) will be issued for July and is expected to record a 2.2 pct rise in inflation for the year. Industrial production is likely to gain by around 0.4 pct. This is a leading indicator of economic health, as manufacturers of goods tend to be sensitive to developments relating to demand.

Volume of shares traded came in at 1.56 billion today, worth just $4.2 billion. 444 shares were up, 451 were weaker and 339 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down 0.23 pct or 10 pts to 4246.

Due to daylight savings, most major European markets are now trading between 5pm (AEST) and 1.30am (AEST). Futures are currently pointing to a weaker start to trade.

U.S futures are also pointing to a lower 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) has fallen slightly against the greenback, partly impacted by some disappointing economic news out this morning. The AUD buys US104.7 cents, is trading at £66.8 pence and €84.9 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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