Australian Stock Market Report – Afternoon 9/5/2012

MARKET CLOSE
(4.30pm AEST)

Local stocks closed in the red for a second consecutive session today, with losses generally broad-based. Disappointing US manufacturing data released overnight weighed on global sentiment, while the upcoming European Central Bank meeting has also added an air of caution; giving investors in Europe a reason to sell. The All Ordinaries Index (XAO) closed down 27.9pts or 0.6pct to 4297.7 after hitting an intra-day low of 4281.5.

Once again, iron ore miner Fortescue Metals Group (FMG) was hit hard, falling to its lowest level since June 2009. Iron ore continued to slide overnight, settling at US$86.90 a metric tonne. FMG today announced it would sell the power station at its Solomon mine in Western Australia's Pilbara region for $300 million to Canadian group TransAlta, in a bid to strengthen its balance sheet. That move, and yesterday's announcement it would delay expansion projects, failed to convince investors with FMG shares dropping 8.5pct to $3.12 after hitting an intra-day low of $3.06.

Shares in index leader BHP Billiton (BHP) today fell 1.6pct to $31.05 while Rio Tinto (RIO) was off 2pct to $49.34 in response to falling metals prices on the London Exchange.

Financial stocks were also hit hard. Shares in the ANZ (ANZ) lost 0.7pct to $24.17 while Westpac (WBC) was weaker by 1.5pct to $23.95.

Oil refiner Caltex (CTX) successfully tapped the market for $550 million through a capital raising. The equity will be used to pay down debt, and restructure CTX's underperforming Sydney refinery, a move that will see some jobs lost. CTX shares today fell 1.9pct to $15.40.

Healthcare stocks did well today on defensive buying. Shares in Cochlear (COH) added 1.5pct to $68.43 while CSL Limited (CSL) was up 2.8pct to $45.54.

Elsewhere, shares in second hand dealer Cash Converters (CCV) rose 1.3pct to $0.795 after announcing it has opened a franchised store in Dubai. CCV has 130 stores in Australia and more than 600 worldwide. The company says there is strong demand for buying and selling unwanted items in the United Arab Emirates.

Economic data released today showed the Australian economy grew by 0.6pct in the June quarter to stand 3.7pct higher than a year ago. The Australian economy has now completed its 21st year of growth, the longest period of growth in Australia's history. The last recession ended in the June quarter of 1991.

The biggest contributions to growth came from exports (+0.5 percentage points), followed by household spending (+0.3pp), government consumption (+0.3pp), and non-dwelling investment and public investment (each +0.2pp). The biggest drag on growth was by inventories (-0.3pp), imports (-0.2pp), the statistical discrepancy and dwelling investment.

"There are no real surprises in the national accounts. The Australian economy is growing slightly above its long-term average pace, the mix of growth is good, productivity remains firm and inflation pressures are contained," said CommSec Chief Economist Craig James of the data.

The Australian dollar continued to be sold off today, with investors showing caution ahead of the ECB meeting due to be held tomorrow night. The AUD fell below US102c today; ending the session at US101.93c, £0.643 and €81.42c.

On the market overall, a total of 1.67 billion shares were traded, worth $4.86 billion. 304 were up, 628 were down and 348 were unchanged.

At 4.15pm AEST, the SFE 200 Futures market was at 4276, down 37pts or 0.9pct.

Ahead tonight, no economic data is scheduled for release in the US.

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