Australian Stock Market Report – Afternoon 9/13/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket lost a little ground for the second time this week, with the All Ordinaries Index (XAO) easing by 0.5 pct or 23.3 pts to 4359.8. Despite the pullback, investors seemed uninterested with equities as there was only $3.3 billion worth of shares that exchanged hands. This is around 30 pct less than last Thursday's trade volume. Yesterday, the XAO improved by 0.8 pct.

Global markets only moved modestly overnight, as the German Constitutional Court surprised few by approving the new European bailout fund (the European Stability Mechanism or ESM) with a few conditions attached. Markets both in the region and further offshore seem to still be treading water ahead of the Federal Reserve's decision tonight on monetary policy action. The market is hoping for additional stimulus.

Apple (AAPL;us), the world's largest listed company unveiled the iPhone5 overnight. It essentially has a larger screen, is faster, thinner and around 20 pct lighter than its predecessor the iPhone4s. Some expect that around 10 million units could be sold over just the first 10 days on the market. Prior to Apple's initial release of the very first iPhone in 2007, there were many tech experts doubting its potential.

They certainly have been silenced, with 244 million iPhones sold to date and 26 million units sold over just a three month period this year. In its first year on the market in 2007, only 5.5 million phones were sold. Around 60 pct of Apple's total profit comes from iPhone sales. The company made around $40 billion in profit for the 12 months to July this year which is around 2.5 times more than BHP Billiton (BHP).

If Apple was listed on the ASX, it would make up around 40 pct of the Australian sharemarket. It is bigger than BHP, Rio Tinto (RIO), Telstra (TLS), Westfield (WDC), Woolworths (WOW) and the big four banks combined.

The mining sector ended 0.66 pct lower today, with BHP easing by 0.21 pct or 7 cents to $32.78 and the smaller Rio losing 0.07 pct or 4 cents to $55.05. Fortescue Metals Group (FMG) was one of the day's worst performers and slid by 13.83 pct or 48 cents to $2.99. This makes it by far its worst performance of the year. At around 3.30pm (AEST) speculation surfaced of debt concerns for the miner. FMG's fall contributed around 5 pts of the markets 23.3 pt pullback.

The major banks all travelled south, with Westpac (WBC) the worst after falling 0.67 pct or 16 cents to $23.80. National Australia Bank (NAB) lost 0.47 pct or 12 cents to $25.28, ANZ Banking Group (ANZ) dropped 0.25 pct and Commonwealth Bank (CBA) fell 0.07 pct.

The profit reporting season is now well and truly over however Australia's largest department store owner, Myer (MYR) today said that its profit fell 12.7 pct to $139.4 million over the past year. This was a bit worse than expected. MYR shares have fallen by around 6 pct this year, down 45 pct last year and 2.5 pct in 2010.

Diversified services company, Transfield Services (TSE) went ex-dividend today for its $0.09 per share dividend which is due to be paid out to eligible shareholders on 24 October. TSE shares slumped 5.54 pct or 10 cents to $1.70.

No major economic news was issued in Australia today, however the Reserve Bank (RBA) issued more detailed estimates on job market trends, in addition to the September quarter's Bulletin. The RBA's Bulletin contains speeches, articles and tables of relevant information which was delivered or issued over the quarter.

This particular report contained articles on topics such as the capital expenditure trends for Australian businesses, the housing sector, construction in China, our labour market and the price of crude oil.

The start of the article on crude oil, which was titled "The Pricing of Crude Oil" contained a few interesting points about oil. "The crude oil market is significantly larger than that for any other commodity, both in terms of physical production and financial market activity. The value of crude oil production is more than twice that of coal and natural gas, 10 times that of iron ore and almost 20 times that of copper. Crude oil is the most widely used source of fuel, supplying around one-third of the world's energy needs. It is also used to produce a variety of other products including plastics, synthetic fibres and bitumen. Accordingly, changes in the price of crude oil have far-reaching effects." If you are interested in this article or any of the other numerous articles and charts released by the RBA over the past quarter, visit this website: http://www.rba.gov.au/publications/bulletin/2012/sep/pdf/bu-0912.pdf.

Tomorrow, no major economic news is scheduled for release in Australia. The European Finance Ministers will be meeting tomorrow.

No major economics news was issued in the region today and most markets ended mixed. Shares in China and South Korea finished a touch weaker along with New Zealand's NZX 50 Gross index. Shares in the Philippines and Japan managed to improve modestly as did markets in Hong Kong.

In Europe last night, the German Constitutional Court approved the new European bailout fund (the European Stability Mechanism or ESM). Despite there being some conditions attached by the court, the result was largely in-line with market expectations. This was the main reason why markets did not plummet overnight, but only ended either a touch weaker or firmer. Shares in the U.S rose by 0.1 pct, while the German market edged higher by 0.5 pct.

In Europe tonight, the Italian government will be holding a 10-year bond auction, as will the British government.

In the U.S tonight, the Federal Open Market Committee (FOMC) will be meeting for the second day of its two day meeting. The market is hoping for the announcement of some stimulus. The FOMC will be delivering its statement to the market at 2.30am (AEST), so be prepared to see American markets react to the news around that time. The Federal Reserve's latest economic projections for the U.S economy will be issued at 4am (AEST).

The Federal Open Market Committee (FOMC) is the section of the central bank which makes monthly decisions on interest rates.

Also tonight, producer prices for August will be issued in addition to the weekly report on unemployment claims and a 30-year bond auction.

Volume of shares traded came in at 1.44 billion today, worth $3.33 billion. 395 shares were up, 502 were weaker and 377 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down 0.11 pct or 5 pts to 4343.

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 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) lost a little ground but is still remaining strong against the greenback. The AUD buys US104.4 cents, is trading at £64.8 pence and €80.9 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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