Thursday 28, June 2012==180/186==wk 78==Cat Stevens you can marry -- FEC

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Date Posted: 05:21:59 06/28/12 Thu
Author: Australian Stock Market Report a quet week
Subject:

Thursday 28, June 2012==180/186==wk 78==Cat Stevens you can marry

Australian Stock Market Report

Thursday 28, June 2012

Summary Close Movement % Change
All Ordinaries 4085.60 1.60 0.00
All Industrials 4044.80 1.60 0.00
50 Leaders 4094.50 0.60 0.00

Market Turnover
$A 3,982,002,766.00

Commentary

For detailed video updates:
http://commsec.viotv.com

MARKET CLOSE
(4.30pm AEST)

The Australian market ended largely flat today after rising for much of the session. It was also a very quiet day ahead of an important meeting in Europe which takes place tonight. This week has actually been one of the quietest so far this year.

Most of the larger sectors rose a touch, but it was the energy sector which held the market back most significantly. Oil and gas producer, Santos (STO) fell by 5.34 pct or 59 cents to $10.45 making it its biggest daily fall since August last year. The company announced a US$2.5 billion cost blowout for its Gladstone LNG project in Queensland.

There were some reports today that News Corp’s (NWS) board has approved at least in principle a proposed plan to split its business in two. This would effectively separate its publishing business from its better performing entertainment unit. NWS shares jumped by 4.05 pct or 87 cents to $22.37, taking the gains for the year to almost 25 pct (calendar year).

Yesterday, the mining sector was the only drag on trade however resource companies outperformed the broader market. Australia’s second largest miner, Rio Tinto (RIO) edged higher by 0.15 pct or 8 cents to $55.16 while BHP Billiton (BHP) gained 0.42 pct or 13 cents to $30.73.

Wholesale grocery distributor, Metcash (MTS) was in a trading halt today after recording a 63 pct drop in its full year profit to $262.5 million. The company announced its intention to raise $325 million to pay for a number of acquisitions, including Autobarn (Australia’s largest retailer of aftermarket goods for cars). MTS also intends on buying up the remainder of hardware chain, Mitre 10.

Today was one of the busiest days of the week for economic news. The latest report on financial accounts was out and recorded a rise in household wealth per capita to $50,786 (previously $47,269)

Commsec Economist Savanth Sebastian said that “Cash is still king. Australian companies are continuing to hold more money in liquid cash and deposits than ever before. Just under half of financial assets at private sector companies are held in cash or deposits, while households are holding just over a quarter of their assets in cash and deposits. The high level of liquid assets is both positive and negative. Companies are well able to deal with the challenges posed by the volatile global financial conditions. But at what point does the level of cash become too much? It is easy to hold funds in liquid form of cash and deposits, but shareholders also want companies to be exploring opportunities to increase efficiency, productivity or growing organically or by acquisition.”

Data on job vacancies out this morning has shown that there was a 5.3 pct fall in the number of available positions between March and May this year. There are around 172,000 unfilled jobs across the country. Mr Sebastian said that “Over the past year job vacancies fell by 8,900 or 4.9 per cent. Vacancies rose most in retail trade (up 3,000), other services (up 2,200), manufacturing and education & training (both up 1,500). Vacancies fell most in admin jobs (down 5,600), professional and scientific services (down 4,800), and health (down 3,300).”

In Asia today, markets ended largely mixed. Shares in Japan rose most impressively and jumped 1.65 pct or 143.62 pts to 8874.11. The gains were partly due to a report showing that the Japanese consumer picked up their spending more than expected in May.

Tonight in Brussels, European leaders will be meeting at a summit. Leaders still seem to be divided on the best solution for the region. Germany’s Chancellor Angela Merckel has said that sharing debt via the introduction of Eurobonds is not going to take place in her lifetime whereas the French and Italian leaders seem quite keen on the idea. The borrowing costs for a number of Eurozone economies remain uncomfortably high. Governments in Italy, Spain and Ireland need to pay more than 6 pct interest to keep their economies running. Portugal needs to fork out around 9.6 pct while Greece is the worst of the bunch with investors demanding 25.6 pct interest on borrowed funds.

In the U.S tonight, the latest quarterly report (January to March) on economic growth will be released and is expected to rise by around 1.9 pct. The latest numbers on unemployment claims will be out at 10.30pm and is likely to fall to around 385,000. This evening a member of the Fed will be delivering a talk and the U.S Supreme Court will be ruling on a challenge to President Obama’s healthcare plan. On the corporate front, Research In Motion (RIM) will release its profit results. RIM is the company behind the Blackberry phones. A loss is expected as the company just has not been able to keep up with the likes of both Apple and Samsung.

Volume of shares traded came in at 1.63 billion today, worth $3.97 billion. 492 shares were up, 524 were weaker and 423 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down 0.3 pct or 12 pts to 4008.

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

U.S futures are pointing to slightly better start to trade. 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 around its best levels in a week and buys US100.9 cents. The AUD is trading at Ł64.8 pence and €80.8 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.

Have a wonderful evening.

Steven Daghlian
Commsec Market Analyst

LUNCHTIME REPORT
(12pm AEST)

Local stocks are gaining traction for a second consecutive session, following gains on US and European markets overnight. Positive US housing data boosted sentiment, although volumes were low in Europe ahead of a key European Union summit kicking off tonight in Brussels. At lunchtime in the East, the All Ordinaries Index (XAO) is up 18.8pts or 0.5pct to 4102.8.

Materials and financial stocks are leading the gains, with shares in Rio Tinto (RIO) firmer by 1.2pct to $55.74 and the Commonwealth Bank (CBA) firmer by 1pct to $52.68.

In the energy space, shares in Santos (STO) are down 5.2pct to $10.47 after the company revealed a $2.5 billion cost blow-out at its LNG project in Queensland.

Media stocks are once again dominating headlines. Australia’s richest woman and the largest shareholder of Fairfax Limited (FXJ) has today been denied a seat on the company’s board after she announced she will not agree to the charter of editorial independence adopted by Fairfax. FXJ shares are down 1.4pct to $0.5475.

Meanwhile, a formal announcement outlining a separation of News Corporation’s (NWS) key businesses is set to be announced today. It’s understood the Board has met in New York and agreed in principle to the split, which will see the lucrative entertainment business separate from the publishing arm, which is suffering brand damage in the wake of last year’s News Of The World phone hacking scandal. NWS shares have today hit a four year high, up 3.4pct to $22.24.

Elsewhere today, grocery wholesaler Metcash (MTS) has been placed in a trading halt, as it attempts to raise $325 million to purchase the rest of Mitre 10 it doesn’t already own. MTS today announced a full year profit of $90 million. MTS last traded at $3.74.

The Australian dollar is buying US101.16c, Ł0.6491 and €80.97c.

Juliette Saly
CommSec Market Analyst

MORNING REPORT
(7am AEST)

US durable goods orders rose by 1.1pct in May, ahead of expectations for a gain of 0.4pct. Excluding transport, orders were up 0.4pct. Pending home sales rose by 5.9pct in May to be up 15.3pct on a year ago. Economists only tipped a gain of 1.0pct.

European shares rose on Wednesday with positive US economic data boosting investor sentiment. But trading volumes were thin ahead the start of the two-day European Union leaders summit. The benchmark FTSEurofirst 300 index rose by 1.4pct with the UK FTSE also up by 1.4pct and the German Dax was higher by 1.5pct. In London trade shares in BHP Billiton rose by 0.8pct with Rio Tinto up by 0.7pct.

US sharemarkets rose on Wednesday with yet more upbeat US housing data serving to boost sentiment. Gains were broad-based but the energy sector led the way, up 1.9pct followed by healthcare. And the PHLX housing sector index rose by 2.9pct after Lennar, the third largest homebuilder, reported the fifth straight quarterly lift in orders. At the close of trade, the Dow Jones was higher by 92pts or 0.7pct with the S&P 500 up 0.9pct while the Nasdaq gained 21pts or 0.7pct.

US treasuries were little changed on Wednesday. While shares rose and economic data was stronger-than-expected, an auction of $35 billion of five-year notes on Wednesday saw weak demand, producing the lowest bid-to-cover ratio since June 2011. US 2yr yields were flat at 0.31pct and US 10yr yields fell by 1pt to 1.62pct.

Major currencies were mixed against the greenback in European and US trade on Wednesday. The Euro fell from highs near US$1.2500 to US$1.2445 and closed US trade near US$1.2465. The Aussie dollar rose from lows near US100.40c to US100.85c and ended US trade near US100.75c. And the Japanese yen eased from 79.42 yen per US dollar to JPY79.86 and ended US trade near JPY79.75.

Benchmark crude oil prices rose again on Wednesday. An oil workers strike in Norway served to boost prices together with solid US economic data and figures showing that US crude and distillate inventories fell last week. Brent crude rose by US48c to US$93.50 a barrel. US Nymex crude rose by US85c or 1.1pct to US$80.21 a barrel.

Base metal prices were mixed on the London Metals Exchange on Wednesday. Aluminium, copper and tin rose up to 1.5pct while other metals fell up to 1.1pct. Encouraging US housing data was balanced against caution ahead of the EU summit. The gold price rose modestly in thin trade ahead of the EU summit. The August Comex gold futures price rose by US$3.50 an ounce to US$1,578.40 an ounce.

Ahead: In Australia, the quarterly financial accounts are released together with quarterly job vacancies and new home sales data. In the US revised economic growth figures for the March quarter are issued together with weekly data on claims for unemployment insurance.

Craig James
Commsec Chief Economist

This commentary is a general account of the day's trading and is not intended to be taken as a recommendation to buy, hold or sell any particular stock.

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