Australian Stock Market Report – Afternoon 8/16/2012

AFTERNOON REPORT
(4.30pm AEST)

The Australian sharemarket improved for the third time this week, with the All Ordinaries Index (XAO) gaining 1.1 pct or 46.5 pts to 4353.5. The energy and financial sectors led the rest of the market higher, while the property trusts ended flat.

After a tough start to the week, the financial sector rose strongly today, with the S&P/ASX 200 Financials index rising by 1.33 pct or 58.5 pts to 4458.1. Westpac (WBC) gained 1.86 pct or 44 cents to $24.12, while Commonwealth Bank of Australia (CBA) jumped by 1.78 pct or $1.00 to $57.05. ANZ Banking Group (ANZ) rose 1.14 pct or 27 cents to $23.90, while National Australia Bank (NAB) gained 0.99 pct or 24 cents to $24.50.

The mining sector was less impressive; however made up for a slight fall earlier in the session. The S&P/ASX 200 Materials index edged higher by 0.49 pct or 47.4 pts to 9668.1. The world's largest mining company, BHP Billiton (BHP) rose by 0.8 pct or 26 cents to $32.88 while the smaller, Rio Tinto (RIO) slid by 0.64 pct or 35 cents to $54.75.

BHP first listed on the sharemarket in 1885 and makes up around 9 pct of the total Australian market on its own. RIO made its debut in 1961 and is approximately four times smaller than BHP.

The profit reporting season continues with a number of big name stocks issuing either half yearly or annual results. This included the likes of; Wesfarmers (WES), the owner of Coles, wealth manager AMP (AMP), the Australian sharemarket operator ASX, aluminium company Alumina (AWC), and finally cemetery and funeral home owner Invocare (IVC).

Wesfarmers (WES) recorded an 11 pct rise in Full-Year (FY) profit to $2.1 billion, with around 60 pct of its earnings coming from its supermarket chain, Coles. WES announced a 95 cents a share final dividend, payable to eligible shareholders on 28 September. It owns companies and operates in a number of various industries, including; home improvement and office supplies, insurance, resources, chemicals, energy & fertilisers, in addition to industrial and safety industries.

It owns Coles and the Australian operations of both Kmart and Target. In the 2012 financial year, Coles opened 19 new supermarkets, 35 liquor stores, one hotel and 10 convenience stores. As at the end of June this year, Coles now has 792 liquor stores, 627 Coles express sites, 749 supermarkets and 92 hotels according to the financial report. WES shares rose 3.79 pct or $1.23 to $33.72 today, taking the gains for the year to 14.31 pct.

AMP shares jumped by 4.81 pct or 20 cents to $4.36 following a 10 pct rise in its first half profit to $383 million. The improvement can be partly attributed to its merger with AXA Asia Pacific.

The ASX eased 0.35 pct or 11 cents to $31.30 after announcing a 3.7 pct fall in net profit to $339.2 million. Lower trading volumes and conservative investors hurt its bottom line.

Funeral home and cemetery operator Invocare (IVC), jumped by 2.96 pct or 25 cents to $8.70, following a rise in profit for the first six months of the year to $174.8 million. Its profit was boosted by its New Zealand acquisition of Bledisloe, which is the market leader in its field in New Zealand. Over the past five years, the company has added 37 new funeral locations and its shares have improved by 55 pct over just four years.

On the economic front, a report on average weekly earnings was out earlier in the day. This data is useful in providing dollar estimates on wages per industry across Australia. According to the study, the average weekly wage rose by just 0.7 pct between April and June this year. The average wage currently stands at $70,262, while the highest can still be found in the mining sector at $118,160 per year. The lowest average wage is in the Accommodation and Food Services sector in addition to retail trade, with both having an average salary of around $50,000.

CommSec Economist, Savanth Sebastian said that "The best measure of wage growth is the wage cost index which came out yesterday. And that data showed wage growth remains subdued in the private sector. The average weekly earnings data is affected by compositional changes, such as the shift from full-time to part-time and movements across sectors. But the average weekly earnings data provides useful dollar estimates for wages. And there are clearly some major differences across the country when it comes to wages. Western Australia continues to dominate as the high wage state, but coming up quickly is the Northern territory, with the average wage growing at a staggering 9.2 per cent over the past year compared with the likes of NSW where wage growth has been a more subdued 2.5 per cent over the past year. Male wages continue to outpace female earnings. And the gap between high and low wage industries continues to widen."

No major economic news is due for release tomorrow.

There was no major economic news released in the region today; however most markets ended the session mixed. Shares in Japan improved by 1.88 pct, while stocks in Taiwan edged higher by 0.3 pct. Markets in China, the Philippines and New Zealand all ended a touch lower.

Economic news was light overnight, which is part of the reason why global markets were quiet and mostly flat. The unemployment rate in the U.K fell from 8.1 pct to 8.0 pct; a slightly better than forecast result. The British economy has contracted for three consecutive quarters, leaving it well in recession. A technical recession is when an economy shrinks for two straight quarters.

Tonight, Europe's Consumer Price Index (CPI) will be issued at 7pm (AEST) and is expected to show a 2.4 pct rise over the past 12 months. In the U.K, a report on retail spending will be announced at 6.30pm (AEST) and is likely to record a modest 0.1 pct rise.

In the U.S tonight, the main highlight will be a number of readings on the American housing market. The latest housing starts report is due to be release at 10.30pm (AEST) along with building permit numbers. Building (housing) starts measure the number of new residential buildings that started being built in April, while permits measure the number of new residential building permits which were issued by government in the previous month. Both reports give the market an idea how the construction sector is fairing (one of the first necessary steps to build a property is to receive a permit (the OK) to do so).

Tomorrow in Australia, a number of large companies will be issuing their profit numbers. This will include the country's largest insurance company, QBE Insurance (QBE), oil and gas producer, Santos (STO) and Treasury Wine Estates (TWE), which is the company that split from Fosters last year.

Volume of shares traded came in at 1.59 billion today, worth just $4.6 billion. 525 shares were up, 367 were weaker and 344 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 4282.

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 to trade.

U.S futures are also pointing to a slightly better 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) remains at a similar level as this time yesterday. The AUD buys US104.8 cents, is trading at £66.9 pence and €85.4 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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