Australian Stock Market Report – Afternoon 8/22/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket ended a touch lower by close of trade, with the All Ordinaries Index (XAO) easing by just 0.2 pct or 7.5 pts to 4403.3. On two occasions, the market briefly snuck into positive territory only to fall back into the red a few minutes later.

The local market is now up 7.8 pct since the start of 2012 and has caught up with the American market which is up 8.1 pct this calendar year. Shares have improved for seven of the past eight months.

Global markets ended mixed overnight, with no major economic data to drive trade. Commodity prices rose however; partly due to some speculation of additional Chinese stimulus later this year and hopes that the European Central Bank (ECB) will further assist the Euro Area.

The profit reporting season continued today, with over 20 large companies releasing either their half-yearly or annual profit reports. This included blood and plasma firm, CSL, Coca-Cola Amatil, Suncorp, BHP Billiton and oil and gas producer Woodside Petroleum.

The energy sector was the worst performing region of the market today, with the S&P/ASX 200 Energy index slumping by 1.49 pct or 195.2 pts to 12945.6. Note that the energy sector improved by 1.37 pct yesterday, so it effectively wiped out those gains today. Woodside Petroleum (WPL) fell by 3.06 pct or $1.10 to $34.90 following an uninspiring profit result for the previous half (January to June).

BHP Billiton (BHP), the world's largest miner ended the day a touch lower despite recording a US$17.1 billion underlying profit (prior the deduction of one-off items). BHP is down 3.66 pct this calendar year, adding to last year's 23.93 pct pullback.

The four major banks ended mixed, with Commonwealth Bank (CBA) down 0.82 pct or 46 cents to $55.34, while National Australia Bank (NAB) eased by 0.43 pct or 11 cents to $25.26. Both Westpac (WBC) and ANZ Banking Group (ANZ) improved by just a few cents.

Queensland based financial services company, Suncorp (SUN), announced a 59.8 pct rise in Net Profit to $724 million. The stronger profit came despite a large number of natural disasters including; flooding in Queenland and New South Wales; in addition to last year´s Melbourne Christmas Day hailstorms.

These disasters cost the company around $278 million more than its own expectations. Its earnings were boosted by strong rate increases, due to those natural disasters. Its premium income rose 17.6 pct for home insurance alone. SUN earned almost 70% of its profit within its General Insurance unit, which made up for a fall in earnings in its banking division. SUN owns brands such as; AAMI, Just Car Insurance, Shannons & Bingle.

SUN announced a $0.20 per share fully franked dividend in addition to a $0.15/share special dividend. Both have an ex-dividend date of 27 August and are expected to be paid to eligible shareholders on 1 October. Its shares have jumped by close to 9% since the start of this calendar year, which is around 2% better than the broader market.

No major economic news was issued today, while tomorrow is also set to be a quiet session for statistical data and reports. On Friday however; the Reserve Bank Governor, Glenn Stevens will be involved in his semi-annual testimony to the House Economics Committee. Governor Stevens will face a grilling by parliamentarians. He will almost undoubtedly be quizzed on the strength of the Australian dollar and its impact on the economy. The impact of currency accompanied by weaker metal prices will be another focal point.

Across the region, most sharemarkets lost a bit of ground, with shares in the Philippines falling most significantly. Japan's Nikkei 225 eased by 0.25 pct, China's Shanghai Composite Index dropped by 0.5 pct, while Hong Kong's Hang Seng dropped by 0.99 pct.

Tomorrow, the HSBC Flash Manufacturing PMI will be issued at 12.30pm (AEST). This is an estimate of the health of the smaller to medium sized manufacturing businesses across China this month. Last month, it recorded a drop from 49.5 to 49.3. This is a survey of around 400 small to medium sized businesses in China. It asks questions on the relative level of business conditions relating to employment, production, new orders and inventories and is a broad measure of the health of these businesses.

There is barely any economic news scheduled for release in Europe tonight; however it should be a bit busier in the U.S. The latest existing home sales report will be issued for the month of July. Economists are tipping a 3 pct lift in sales, following a 5.4 pct pullback in June. The recovery isn't expected to take place in a straight line; nevertheless is likely to continue in the coming months.

The Federal Reserve's minutes from its latest interest rate meeting will also be issued at 4am (AEST) tomorrow morning. The Fed seems to be content to remain in "wait and see" mode for the time being, unless the situation worsens in the U.S or Europe.

Volume of shares traded came in at 1.64 billion today, worth $4.2 billion. 431 shares were up, 489 were weaker and 344 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.02 pct or 1 pt to 4362.

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) is around half a cent lower against the greenback than at this time yesterday. The AUD buys US104.6 cents, is trading at £66.1 pence and €83.8 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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