Australian Stock Market Report – Afternoon 8/17/2012

AFTERNOON REPORT
(5pm AEST)

There's been some positive momentum gaining across global markets over the past 24 hours after German Chancellor Angela Merkel voiced support for the European Central Bank's efforts to prop up the Eurozone. US share markets rose to four month highs overnight, while European markets also rallied. Here positive earnings reports helped boost sentiment with the All Ordinaries Index adding to yesterday's gains, up 1pct. Over the week, the market gained 2pct.

The ANZ Bank (ANZ) was a standout performer today, rising 3pct to $24.61 after impressing the market with its third quarter trading update. The ANZ saw its underlying profit for the nine months to June rise 5.5pct to $4.5 billion. Shares in Westpac (WBC) also performed well, gaining 1.6pct to $24.50.

Material stocks also performed well. Next week, index leader BHP Billiton (BHP) reports its first half profit, while iron ore miner Fortescue Metals Group (FMG) also comes out with numbers. Today BHP added 0.4pct to $33 while FMG was up 2pct to $4.20.

Australia´s largest listed insurance company, QBE Insurance Group (QBE), released a lower than expected first half profit of US$760m. Profit was higher than this time last year, due to the large number of natural disasters in 2011, which cost the company around US$1.7b. This included earthquakes in Japan and New Zealand, in addition to severe floods and bushfires in Australia. Insurance profit in Australia more than tripled over the half, however its other markets disappointed. QBE has been able to increase premiums within the country due to the catastrophes, however hasn´t been able to do the same offshore. QBE declared 40c per share dividend, expected to be paid to eligible shareholders on 24 September. Listed companies pay dividends from their earnings, with QBE using 64pct of its profit or AU$473m to distribute its dividend. This is 30pct less than in the corresponding period in 2011. Looking ahead, the insurer has downgraded its expectations for insurance margins, putting its shares under selling pressure. QBE fell by 4.47pct to $13.05 today.

Energy company Santos (STO) announced a $262 million underlying profit for the first half of the year. This was higher than most market expectations. STO is the largest producer of natural gas to the Australian domestic market, supplying around 14pct of the country´s gas needs according to the report. It produces gas in Australia, PNG, Indonesia and Vietnam and has 3,100 employees. The rise in earnings was driven by higher gas prices and strong volume; however was held back by higher costs of sales and expenses relating to exploration. Production was up 11pct over the half, making it the highest first-half production in three years. The company announced a 15 cent per share interim dividend to be paid to eligible shareholders on 28 September 2012. Investors should keep an eye out for the ex-dividend date, which determines eligibility for the distribution. Santos has maintained its production expectations for the full year and its share price rose 3.2pct today to $11.78.

Luxury goods retailer Oroton (ORL) saw its share price fall by 18.4pct today to $6.32 after losing the exclusive distribution rights to Ralph Lauren products in Australasia. The deal will end on June 30 2013.

On the market overall, a total of 2.05 billion shares were traded, worth $4.3 billion. 659 were up, 328 were down and 317 were unchanged.

At 4.30pm AEST on the futures exchange, the SFE 200 Futures market was at 4330, up 47pts.

The Aussie dollar ended the day's trade at US104.51c, €84.48c and £0.6647.

Ahead tonight, the leading indicators index is released in the US.

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