Australian Stock Market Report – Afternoon 9/26/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket lost a little ground for the third straight day, with the All Ordinaries Index (XAO) easing by 0.3 pct or 13 pts to 4382.5. It could have been worse however; as American markets dropped by around 1 pct overnight. Charles Plosser, a Federal Reserve member from Philadelphia said that the U.S central bank's decision to stimulate the economy a few weeks ago is unlikely to help boost growth. This is the type of commentary that markets tend to not digest very well. Shares in Europe managed to rise modestly however.

The mining, energy and financial sectors all ended in the red today, which held the market back. Those three industries combined make up around 65 pct of the Australian sharemarket.

The S&P/ASX 200 Materials index fell by 1.08 pct or 106.4 pts to 9782.2. The world's biggest miner, BHP Billiton (BHP) lost 1.32 pct or 44 cents to $32.81 while the smaller Rio Tinto (RIO) dropped 2 pct or $1.08 to $52.89. In terms of market capitalisation (size on the market), BHP is around four times larger than RIO.

The major banks finished mostly weaker, with the exception of Commonwealth Bank of Australia (CBA). National Australia Bank (NAB) fell by 0.63 pct or 16 cents to $25.42, ANZ Banking Group (ANZ) lost 0.24 pct or 6 cents to $24.50 while Westpac (WBC) eased by 0.08 pct or 2 cents to $24.52. CBA managed to rise for the second straight day today and ended 0.11 pct or 6 cents higher to $55.37.

After almost nine full months of trade this year, the major banks are all outperforming the broader sharemarket. WBC is up 22.6 pct this year; ANZ has improved by 19.3 pct; CBA is 12.5 pct higher while NAB is up 8.8 pct. The XAO is up 6.6 pct over the same period (since the start of January 2012).

Tasmanian timber company, Gunns (GNS) went into receivership yesterday after failing to secure sufficient funding to stay in business. GNS had a market cap of around $135 million and was up by 28 pct since the start of the year. Last year however, its share price slumped by 80 pct.

It was a quiet day for economic news today; however the Australian Bureau of Statistics (ABS) issued its Social Trends publication. This includes data on how Australians are faring on health issues compared to other countries. According to the ABS website, the report is aiming to use statistics to paint a picture of Australian society.

Topics such as population; family and community; health; education and training; work; economic resources; housing; crime and justice in addition to culture and leisure are all covered in the report. This 27 page report is publicly available on the ABS website for those interested in more information.

According to the document, NSW currently has the highest consumption of energy, which is no big surprise while the Northern Territory consumes the least. People in the ACT currently spend the most on their energy bills, followed by Tasmania, Victoria, the Northern Territory and then New South Wales. The lowest energy bills are currently found in Queensland. On average, Australians are spending around $32 per week on electricity, gas, heating oil and wood.

The report stated that "Increases in retail electricity prices varied across the capital cities. Between June 2007 and June 2012, the largest increase in the retail price of electricity was in Melbourne (84%), followed by Sydney (79%). Darwin and Canberra had the smallest increases in retail electricity prices, with 42% and 45% respectively. Between June 2007 and June 2012, the retail price of gas and other household fuels also rose across the capital cities. The largest increase was in Perth, where prices rose by 88%, followed by Canberra (48%). The smallest increases were in Darwin and Hobart, with 21% and 20% respectively."

In relation to education, back in 1970 only three out of every 100 Australians had some type of higher education qualification. This number has now jumped to 25. There are also more women on an annual basis graduating with bachelor degrees than men.

No major economic news was issued in the region today; however almost all markets across Asia Pacific lost ground. Shares in Japan slumped by 2.03 pct, the Chinese market fell by 1.24 pct; shares in Taiwan dropped by 0.83 pct; South Korea's KOSPI index fell 0.55 pct and Hong Kong's Hang Seng ended 0.82 pct lower by the end of the session.

In Europe tonight, a retail sales report will be issued in Italy at 6pm (AEST) and is expected to show that retail spending across the Eurozone's third largest economy is likely to have risen by 0.5 pct last month. In Germany, a 10-year bond auction will be held along with the release of a monthly inflation report.

In the U.S, we'll find out how many new homes were sold across the country in August. The market is expecting home sales to have jumped by around 2 pct over the month. The weekly reading on new applications for home loans and mortgage refinancing will also be issued. Economists expect the housing recovery continued last month. At 12.30pm (AEST), the weekly crude oil inventories report will be released. The U.S is both the world's biggest importer and consumer of the commodity.

Volume of shares traded came in at 1.56 billion today, worth $3.87 billion. 409 shares were up, 497 were weaker and 353 ended unchanged.

At 4.30pm (AEST) on the Sydney Futures Exchange, the ASX24 futures contract is down by 0.09 pct or 4 pts to 4363.

Due to daylight savings, most major European markets are now trading between 5pm (AEST) and 1.30am (AEST). Futures are currently pointing to a slightly weaker start to trade.

U.S futures are pointing to a better 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 trading at close to the lowest levels this month against the greenback. This is certainly not bad news for the tourism sector, the manufacturers and exporters. The AUD now buys US103.4 cents, is trading at £64.02 pence and €80.39 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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