Australian Stock Market Report – Afternoon 9/10/2012

AFTERNOON REPORT
(4.35pm AEST)

Local stocks closed slightly higher today, rebounding from a mid-session slump in response to disappointing Chinese import figures. US and European markets posted modest gains on Friday in response to the bond buying program announced by the European Central Bank late last week and hopes the US Federal Reserve would provide more economic stimulus in the wake of a disappointing jobs report released on Friday. The All Ordinaries Index (XAO) closed up 9.2pts or 0.2pct to 4358 after hitting an intra-day high of 4365.

Mining stocks were the strongest performers today, after China approved 60 infrastructure projects on Friday, valued at $157 billion. The move saw the iron ore price rally by more than 2pct. Shares in Australian iron ore miner Fortescue Metals Group (FMG) today rose by 7.3pct to $3.55 while BHP Billiton (BHP) firmed by 1.5pct to $32.46 and Rio Tinto (RIO) added 4.4pct to $54.70. However in the latest sign that falling commodity prices are beginning to take their toll, BHP Billiton and Xstrata Coal today announced job cuts. BHP will cut 300 positions as it closes its Gregory Crinium open-pit coal mine near Emerald, Queensland. Meanwhile falling commodity prices and the high Aussie dollar has forced Xstrata to slash 600 jobs, including office based positions in Sydney. Most of Xstrata Coal´s Australian operations are located in the Hunter Valley in NSW and Queensland´s Bowen Basin. The company employs 16,000 people worldwide, with the majority based in Australia.

Financial stocks were generally lower. Shares in Westpac (WBC) fell 0.4pct to $23.60 while the Commonwealth Bank (CBA) eased by 0.2pct to $54.48. However shares in Macquarie Group (MQG) rose by 2.1pct to $28.40.

Lend Lease shares came under pressure, falling by 6.6pct to $7.88. Abigroup, a construction company owner by Lend Lease, has reportedly misreported profits and costs in two of its projects. Senior executives of Abigroup have stood aside while an investigation is carried out and LLC says there will not be a financial impact to its bottom line.

Qantas (QAN) continued to rise today, up a further 1.6pct to $1.28. Australia's largest airline has seen its share price rise since announcing a proposed alliance with Emirates late last week. The Singaporean government today admitted the island will be impacted by Qantas's decision, but remains confident it can replace the lost airline and passenger flows. The Qantas / Emirates alliance, if approved, will see Qantas use Dubai as its European hub from April next year.

China today released its August trade surplus, which came in at US$26.7 billion, well outperforming analyst estimates of US$19.5 billion. Imports came in lower than expected at 2.6pct, while exports came in at 2.7pct.

South Korea, meanwhile, has unveiled new stimulus measures worth US$5.2 billion to boost domestic demand. The country's finance ministry says it will push for fiscal support for the remainder of this year, along with 1.3 trillion won for next year. The new support, which follows a package of 8.5 trillion won in June, does not require an additional budget as it comes mostly in the form of reducing taxes and expanding social welfare programs.

In local economic data released today; the number of new owner-occupier housing loans fell by 1pct in July. The value of all home lending rose fell by 1.8pct with owner-occupier loans down by 1.4pct and investment loans down 2.7pct.

The proportion of first home buyers in the market rose from 18.5pct in June to 19.2pct in July, a six month high. Fixed rate loans accounted for 9.9pct of all loans in July, a ten month low. The average home loan across Australia stood at $300,500; down 2.6pct on a year ago.

According to the Australian Institute of Petroleum, the national average retail petrol price rose by 3.4 cents to 147.4 cents a litre in the past week. CommSec tips prices to fall by 2 cents a litre over the coming fortnight.

"The fiscal stimulus provided by the Federal Government's Household Assistance Scheme coupled with tax cuts continues to ripple through the economy," said CommSec economist Savanth Sebastian of the data. "So it is likely that the Reserve Bank will want to wait until the dust settles before deciding on whether a further rate cut is required."

The Australian dollar received a boost today, on hopes the weakness in the US and Chinese economies will lead to more economic stimulus. At 4.30pm AEST the Aussie was worth US103.53c, £0.6473 and €80.98c.

On the market overall, a total of 1.9 billion shares were traded, worth $4.38 billion. 538 were up, 434 were down and 340 were unchanged.

At 4.30pm AEST, the SFE Futures market was at 4330, down 1pt.

Consumer credit data is released tonight in the US.
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