Australian Stock Market Report – Afternoon 9/21/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket ended the day a little higher for the third time this week, with the All Ordinaries Index (XAO) rising by 0.2 pct or 11 pts to 4430.8. The defensive healthcare sector lost a little ground but all other regions of the market ended in the black. Overall however; this has been a very uneventful week for broad market movement, with the XAO gaining just 0.5 pct over the past five sessions.

Global markets were mixed but mostly unchanged overnight, with shares in the U.S up by around 0.14 pct; both the German and French markets ended a touch lower and Italian equities slumped by 1.68 pct. Longer term borrowing costs for the Irish government fell below 5 pct for the first time in two years.

The Spanish government successfully raised €4.8 billion via a bond auction overnight but it wasn't enough to lift the Spanish sharemarket. The IBEX 35 Index fell by 0.95 pct in last night's trade.

One of the best performers on the Australian sharmarket today, was investment company, Premier Investments (PMV) which rose 8.11 pct or 42 cents to $5.60. It recorded a 68 pct rise in its annual profit (for the year ending July 28) to $68.2 million. PMV is the company behind Jay Jays, Dotti, Portmans, Jacqui E, Peter Alexander, Smiggle and Just Jeans. Smiggle and Peter Alexander have been two of the standouts in recent years.

Surfwear retailer, Billabong (BBG) rose by 1.49 pct or 2 cents to $1.36 today following a 7.3 pct slump yesterday. This was after an unnamed group decided to withdraw its takeover offer for BBG yesterday. BBG shares are down 3.44 pct this year and slid by 78 pct in 2011.

Yesterday, the Reserve Bank of Australia issued its annual report. Its profit increased to close to $1.1 billion for the year. The RBA holds around $4 billion worth of gold on its books. Both the Governor and Deputy Governors earned around $986,000 in total remuneration last year.

BHP Billiton (BHP), the world's largest mining company ended completely unchanged for the first time since 12 March this year. The smaller Rio Tinto (RIO) eased by 0.44 pct or 25 cents to $56.33. Australia's third biggest iron ore miner, Fortescue Metals (FMG) edged higher by 0.28 pct or 1 cent to $3.61.

The major banks finished mixed but mostly stronger, with National Australia Bank (NAB) ending just 0.51 pct or 13 cents lower to $25.40.Westpac (WBC) jumped by 1.36 pct or 33 cents to $24.62, ANZ Banking Group (ANZ) rose by 0.4 pct or 10 cents to $24.84 and Commonwealth Bank (CBA) edged higher by 0.33 pct or 18 cents to $55.15.

No major economic data was released today.

Yesterday in the region, the HSBC Flash Manufacturing PMI was issued and came in at 47.8, which indicates contraction within China's manufacturing sector. This is a measure of the health of China's manufacturing industry at any given point over the month. Any reading below 50.0 indicates a shrinking industry. China buys around a quarter of all Australia's exports each year. Shares in Shanghai slumped by 2.1 pct on Thursday and hit their lowest levels since early 2009. Chinese shares edged higher by 0.25 pct today.

On Tuesday, the Reserve Bank of Australia (RBA) released the board minutes from this month's interest rate meeting. On Tuesday 4 September, the RBA decided to keep rates on hold at 3.5 pct for the third straight month. The minutes revealed that its decision a fortnight ago to remain on the interest rate cutting sidelines was a more finely balanced affair than many expected.

The RBA currently has no shortage of reasons to cut rates at some point this year, with the Australian dollar remaining a little too strong which hurts our exporters; the jobs market showing signs of slowing, with the number of jobs advertised by Australian businesses falling for five straight months; the housing market remaining subdued; global economies remaining fragile and uncertain (in particular the Eurozone); and inflation under control locally.

Looking ahead to tonight, no major economic news is scheduled for release in either Europe or the U.S. At 2.40am (AEST), a Federal Reserve official will be speaking about the economic outlook and monetary policy at the 2012 Institute of Internal Auditors Conference in the U.S.

Next week in Australia, the Assistant Governor, Guy Debelle will be delivering a speech. The June quarter financial accounts, population data for the March quarter, job vacancy data and a private sector credit report will all be issued.

Volume of shares traded came in at 2.2 billion today, worth $4.48 billion. 506 shares were up, 429 were weaker and 349 ended unchanged.

At 4.30pm (AEST) on the Sydney Futures Exchange, the ASX24 futures contract is up 0.11 pct or 5 pts to 4410.

Due to daylight savings, most major European markets are now trading between 5pm (AEST) and 1.30am (AEST). Futures are currently pointing to a mixed start in Europe tonight. Shares in France and Germany are expected to rise modestly while both the Italian and Spanish sharemarkets are expected to lose ground on the open.

U.S futures are pointing to a stronger 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) has made back some lost ground, and is higher against the greenback. The AUD now buys US104.6 cents, is trading at £64.4 pence and €80.6 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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