Australian Stock Market Report – Midday December 8, 2014

n office worker walks past an Australian Securities Exchange (ASX) window showing the main losses for the day in central Sydney July 23, 2012. Australian shares slumped 1.7 percent on Monday, the biggest one-day fall in seven weeks, as investors fled from riskier assets such as equities on renewed fears that Spain may be unable to dodge a costly bailout. Reuters

Banks rally on Murray Review

 Local stocks have started the second week of December on a strong footing. The ASX 200 opened flat, although buyers were waiting in the wings and the market was well supported over the course of the morning. The upward momentum for the market ebbed when the index hit the 5380 but prices remained well supported around these levels into the afternoon.

 Encouraging news on the US economy at the weekend informed the positive tone of the morning. US non-farm payrolls (employment) rose by 321k in November, the biggest in 3 years (forecasts were near 230k). The jobless rate stayed at 5.8% and hourly earnings rose by 0.4% in the month, above forecasts for a 0.2% gain. As a result US stock markets rose on Friday with the Dow Jones and S&P 500 at record highs in response to better-than-expected employment data. Financials led the way, but weaker commodity prices weighed on metal and oil stocks. At the close of trade, the Dow Jones was up by almost 59 points or 0.3%, the S&P 500 index rose by 0.2% while the Nasdaq lifted 11.3 points or 0.2%. For the week, the Dow rose by 0.7% and the S&P rose by 0.4% but the Nasdaq fell by 0.2%.

 In the domestic picture the main factor driving the positive sentiment was the release of the Murray Review into the financial system. Financials stocks were seeing strong gains as the prospective reforms touted in the document were seen as containing no negative surprises and relating to the medium rather than near term. The big four banks were all more than one per cent firmer. The National Australia Bank (NAB) was the best improved up 66 cents at $33.06. Bendigo and Adelaide added 5 cents to $13.07, Bank of Queensland fell 13 cents to $12.38, Suncorp fell 4 cents to $14.24 while Macquarie Group found 88 cents to $61.28

 Qantas Airways (QAN) shares have surged after providing upbeat guidance for its half-year earnings. The carrier predicts a substantial turnaround in earnings on the back of falling oil prices and the accompanying drop in fuel prices in addition to long-running cost-cutting measures which are delivering bottom line results. QAN expects underlying profit in the six months to the of the year December to be between $300 million and $350 million. This compares to a reported loss of $252 million in the same period last year. In earlier updates QAN had forecast a return to profit without being specific. However the carrier didn't provide any guidance on a net-profit basis instead saying that all parts of the group, including its ailing international division, are expected to be profitable on an underlying pre-tax basis in the first half of its financial year. QAN shares were ahead by 12 per cent.

 Commodity prices remain a headwind for the Aussie dollar on Monday with the local unit flirting with the 83.00 US cent mark. World oil prices fell at the weekend in response a stronger US dollar. A firmer greenback makes dollar-denominated commodities more expensive for buyers in Europe and Asia. Brent crude fell by 57c or 0.8% to US$69.07 a barrel. US Nymex crude price fell by US97c or 1.5% to US$65.84 a barrel. Over the week Brent crude fell by US$1.08 or 1.5% while Nymex eased by US31c or 0.5%. Base metal prices fell by up to 1.9% on the London Metal Exchange on Friday with nickel leading the declines while lead and zinc fell only 0.1%. Gold fell on Friday in response to a stronger greenback with Comex gold futures down by US$17.30 an ounce or 1.4% to US$1,190.40 per ounce. Over the week gold rose by US$15.20 or 1.3%. Iron ore fell by US20c to US$70.90 a tonne on Friday and was up US$1.10 over the week.

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