AUSTRALIAN MARKET CLOSE REPORT
(5.30pm AEDT)

Comments from Central Bankers have been in focus in the last day. Locally RBA Governor Stevens presented a picture of the RBA being alert but not alarmed. In a speech the Governor delivered on Wednesday evening, he reflected on the Chinese slowdown being 'more material' than the Bank had predicted, although the outcome wasn't a 'disaster'.

Terms of trade have been a point frequently visited by the RBA in communications in recent times, mainly because of the inflationary implications. This price threat has subsided significantly most recently, which has created room for recent rate cuts.

Mr Stevens suggested that Terms of Trade will be around 15% below the peak by year end. At the same time he highlighted the prudence of 'sitting still on recent cuts' in an effort to gauge the impact of the reductions on the economy. The comments added little colour to what the markets already knew. The bottom line remains; if conditions locally or elsewhere deteriorate then rates will be cut.

Global markets were offered a reminder of the impact the US fiscal cliff is capable of delivering to the US economy. In a speech made this morning US Federal Reserve Chairman Bernanke stressed that the fiscal contraction will "send the economy toppling back into recession".

A Q&A followed in which Bernanke underscored the (obvious) point, that the Fed doesn't have the tools to offset the fiscal cliff. This articulation has been the tone setter for markets in the last day. Mr Bernanke followed up noting that avoiding the fiscal cliff could make 2013 a "very good" year for the US economy.

The general tone of the talk was cautious, although he indicated that the developments in the US housing market have been encouraging. This was further reinforced overnight by the positive surprise in US housing starts and building permits.

Regional investors continued to tread warily, although the more optimistic tone of recent days had dissipated. Most markets throughout the region ended higher although the gains were modest. Conspicuously the Shanghai market continues to flirt with the key support level of 2000.

The S&P/ASX200 index fell 0.37% to 4369.5.The broader All Ordinaries index was 0.38% lower at 4390.7. 1.41 billion shares were traded value at $3.5 billion 413 stocks ended higher, 499 fell and 365 were unchanged.

Local economic data had little impact on prices. The Westpac Leading Index rose 0.7%, although figures on skilled vacancies fell by 2.5%. The skilled vacancy measure has now been falling consistently since December 2009, a trend that plays into the outlook for lower Australian interest rates.

The performance of the Healthcare sector seemed at odds with the cautious tone of trade. It could be said that the group have victims of their own success, the group led declines for the market.

A combination of their defensive qualities, earnings certainty and high dividends have meant that for some time stocks in the sector have been well supported by investors.

However, the catalyst for today's selling was a broker downgrade of blood products group CSL (CSL) which characterised stock as being too expensive. Investors considered the implications for the sector in the event of a sustained improvement for the global growth picture.

CSL ended at $47.49 down $1.21 or 2.5%. This logic in turn was extended to others in the sector including bionic ear maker Cochlear (COH) which closed at $73.70 down $1.31 or 1.75%, Resmed (RMD) lost 1.3% or 5 cents.

David Jones (DJS) reported an increase in first quarter sales of 0.3% to $415.6m, compared to $414.3m previously. The numbers were below the markets expectations of a 1% increase to $418.4m. DJ's pointed to a similar trend for sales in the second quarter.

Investors questioned the degree to which consumer conservatism is thawing in the wake of recent rate cuts. DJ's shares beat a solid retreat ending 6.2% or 16 cents lower at $2.41. Myer (MYR) lost 3.2% or 7 cents to$2.10. Harvey Norman (HVN) finished at $1.80 down 2% or 3 cents. JB HiFi (JBH) closed at $10.34 down 33 cents or 3.1%.

Comments made by Rio Tinto's CEO Tom Albanese pointing to the leadership change in China as paving the way for a growth revival in China got no traction with mining stocks. Fortescue Metals Group closed at $3.90 down 11 cents or 2.7%, BHP finished at $33.36 easing by 22 cents or 0.6% RIO closed at $56.95 for a loss of 53 cents or 0.9%

Ahead n Europe the Bank of England (BoE) November meeting minutes will be released.

The Aussie Dollar closed at $1.0363 against the Greenback, gold at $1724.20 an ounce and oil(WTI)at $86.92.