Australian Stock Market Report

MIDDAY REPORT
(1pm AEST)

The Australian sharemarket is improving for the second straight day, despite a weaker start to trade this morning. The All Ordinaries Index (XAO) is up 0.2 pct or 8.1 pts to 4317.6 at lunch. Most sectors are gaining modest ground, with the exception of the miners and financials.

The S&P/ASX 200 Materials index (a measure of share performance within the mining sector) is down 0.24 pct. Australia's second largest resource company, Rio Tinto (RIO) is down 0.35 pct or 20 cents to $56.40, while the larger BHP Billiton (BHP) is 0.03 pct or 1 cent higher to $32.90.

The major banks are mixed, with Westpac (WBC) the only major to be a touch higher. National Bank (NAB) is down 1.68 pct or 42 cents to $24.63, ANZ Banking Group (ANZ) is 0.55 pct or 13 cents lower to $23.67 while Commonwealth Bank (CBA) is down 0.13 pct or 7 cents to $55.62.

The reporting season continues, with a number of big names issuing trading updates, half yearly or yearly profit results. National Australia Bank (NAB) recorded a cash profit of $1.4 billion for the three months to June 2012 and announced subdued revenue growth. The result was lower than what the market had expected and takes its cash profit for the nine months to June to $4.23 billion.

Based on its share price, NAB is currently the smallest of the big four banks on the ASX (market capitalisation). NAB has a dividend yield (dividend return) of 7.3%, which based on its current share price is comparable to Telstra´s (TLS). NAB shares are up around 4.1% this calendar year (since 1 January, 2012), approximately 0.65% less than the broader market. The other three major banks are all up by more than 10% this year. The four major banks combined make up around 25% of the Australian sharemarket.

Singapore Telecomm (SGT), the owner of Optus announced a 3 pct rise in quarterly profit to SG$945 million (Singapore dollars). This is approximately AU$726 million. Optus has added around 88,000 new customers over the previous three month, compared to Vodafone Australia losing approximately 176,000 over the half and Telstra (TLS) adding 1.6 million customer over the year. SGT shares are flat at lunch.

Domino's Pizza (DMP) announced a 25.7 pct rise in Full-Year profit to $26.9 million. It opened 38 new stores in Europe and its share price is up 2.66 pct or 25 cents to $9.65. Its Bundaberg store set a new Guinness World Record for the most pizza made in an hour (837). As you can imagine, this has had a negligible impact on its share price.

On the economic front, there was a 0.8 pct fall in the number of cars sold in July to 90,133. Over the past 12 months, Australians have bought about one million new cars, compared to 14-15 million car sales in the U.S and China.

CommSec Economist, Savanth Sebastian said that "Overall it is clear that business remain decidedly cautious about current economic conditions. However over coming months the Reserve Bank would be hoping that the deep rate cuts would provide a positive shock to confidence and support activity. Despite the modest fall in seasonally adjusted terms, the car sales figures in recent months have been relatively encouraging. In original terms, car sales hit a record high in June and held up relatively well in July. In fact even in seasonally adjusted terms sales are up 5 per cent on a year ago. Clearly the improvement in car affordability is the clear driver. Car affordability is at the best levels since the 1970s, and coupled with the recent rate cuts it seems to have prompted consumers to update their rides. "

The strength in car sales can be attributed to healthy demand for 4WDs (Sports Utility Vehicles). Mr Sebastian said that "In fact sales of 4WDs rose by almost 20 per cent in July compared with a year ago. It is clear that Australians have a love affair with 4WD vehicles with one in every three passenger vehicles sold in Australia a sports utility vehicle."

On a positive note, the results of a survey today have shown that businesses are feeling positive for the first time in a number of months. The NAB Business Confidence Index improved from -2.9 to 3.9 last month. A reading above 0.0 indicates optimism within the business community.

Mr Sebastian said that "There were encouraging signs in the latest business survey but it is really just glimmers of hope rather than a significant revival in business sentiment. Business confidence did bounce back into positive territory for the first time in three months. But you could argue that business confidence could have been a lot higher given that the latest survey took place after an array of stimulus measures. Multiple rate cuts, Federal government handouts and even tax cuts would have provided a degree of support to the business sector yet business conditions were disappointingly weaker in July. "

Following the end of daylight savings, major Asian markets will be trading between the hours mentioned below until October this year.

The Hong Kong sharemarket trades in two sessions each day and will now open for trade between 11.30am (AEST) and 2pm (AEST) while the second session is between 3.30pm (AEST) and 6pm (AEST).

Out of Japan, the first session will be between 11am (AEST) and 1pm (AEST) while the second session is between 2.30pm (AEST) and 5pm (AEST).

The Singapore exchange will be open for trade between 11am and 2.30pm (AEST) for the first session and then between 4pm and 7pm (AEST) for the second.

U.S futures are currently pointing to a slightly stronger start to trade tonight. Dow futures are up 14 pts. The U.S market trades between 11.30pm (AEST) and 7am (AEST).

So far in trade at lunch, 824 million shares have been traded worth $1.78 billion. 392 shares are up, 347 are lower and 318 are currently unchanged.

The Australian dollar (AUD) is buying US105.2 cents, €85.2 cents and £67 pence.

The AUD is the world's fifth most traded currency behind the U.S dollar, the Euro, Japanese Yen and British Pound. The AUD accounts for around 7 pct of all foreign exchange trades.

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