re Monday 18/2/2013Wednesday 21, August 2013 -- Notes

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Subject: re Monday 18/2/2013Wednesday 21, August 2013

Author:
EVENING REPORT(5pm AEST)

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Date Posted: 22:30:22 08/22/13 Thu

Australian Stock Market Report

Wednesday 21, August 2013

Summary Close Movement % Change
All Ordinaries 5066.70 -23.60 -0.50
All Industrials 5075.70 -24.30 -0.50
50 Leaders 5230.40 -25.00 -0.50

Market Turnover
$A 5,912,740,261.00

Commentary

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EVENING REPORT
(5pm AEST)

A better than expected reading on the health of China’s manufacturing sector wasn’t quite enough to push local shares into positive territory today. The All Ordinaries Index (XAO) slipped by 0.5 per cent, with the mining sector the biggest drag.

The monthly report on manufacturing issued by HSBC saw the reading rise from 47.7 to 50.1. Any number above 50.0 indicates improving conditions. Although this was better than expected, the industry is still essentially treading water. The result did reduce the losses however and also supported the
Australian dollar somewhat.

The US central bank is still occupying the thoughts of many investors and economists around the world. Talk of QE tapering this year has been one of the major drivers of markets around the world. Last night, there were hopes that the minutes from the last Fed meeting would provide some hints of a particular date for the start of the tapering process. However, a lack of new insights and continued uncertainty is keeping investors on edge. The Fed seems almost certain to taper at some point this year.

Despite there being no major economic news locally today, it was one of the busier days of this profit reporting season. We heard from iron ore miner Fortescue Metals (FMG), Insurance Australia Group (IAG), ASX Limited (ASX), Toll Holdings (TOL) and Origin Energy (ORG).

FMG was one of the standouts, with its shares rising by 4.1 per cent by the end of the day. Net Profit After Tax (NPAT) jumped by 12 per cent to US$1.75 billion. Iron ore shipment guidance was reaffirmed at 127-133mt, part of its US$10 billion worth of debt is expected to start being paid down and it more than double its dividend to shareholders.

ASX Limited (ASX), the operator of Australia´s main sharemarket, reported a 2.7% rise in FY13 (July 2012 - June 2013) profit to $348.2m. The result was in line with its own guidance provided in June and was driven by higher trading volumes this calendar year. Its derivatives business (ASX´s biggest) posted an 11.7% improvement in 2H13 revenue thanks to lower rates. ´Derivatives & OTC markets´ accounted for 32% of revenue.

At the close, 1.9 billion shares changed hands, worth $5.9 billion. 380 stocks improved, 524 lost ground and 305 finished unchanged.

Steven Daghlian
CommSec Market Analyst

MID-SESSION REPORT
(12pm AEST)

The Australian share market is under selling pressure in the early session, following weakness on US markets overnight and as investors awaited a reading on Chinese manufacturing.

That reading saw a rebound in Chinese manufacturing in August, with PMI coming in at 50.1 up from July’s reading of 47.7. The reading saw our market gain a little bit of ground to be down just 0.5 per cent at lunchtime in the East after a more than one per cent fall in early trade.

Overnight, US investors were unimpressed with the lack of detail emanating from the FOMC minutes. Investors had hoped for a timeline as to when the Fed might start winding back its QE3 bond buying program but unfortunately there was little detail.

It’s a busy day on the reporting calendar.

Iron ore miner Fortescue Metals Group (FMG) has reported a 12 per cent rise in FY NPAT to US$1.75B. FMG has reiterated a FY14 guidance of 127-133M tons or iron ore shipments. FMG shares were down almost three per cent in the early session but are up three per cent at lunch to $4.21. FMG shareholders will receive a final dividend of 10 cents per share.

Insurance Australia Group, the parent company of the NRMA, has almost tripled its FY13 profit to $776M. The final dividend has almost doubled to 25c per share. IAG shares rose in the early session but are down at lunch by 1.4 per cent to $5.85.

Pallet provider Brambles (BXB) has missed expectations with its FY13 profit of US$640M, sending its share price down 5.3 per cent to $8.69.

The Australian dollar is below US90c at US89.83c.

A total of 933M shares have changed hands so far, worth $2.6B. 290 are up, 441 are down and 266 are unchanged.

Enjoy your afternoon.

Juliette Saly
CommSec Market Analyst

MORNING REPORT
(6.45am AEST)

Minutes of the US Federal Reserve´s July 30-31 meeting, showed a broader agreement by the committee (than might be inferred from previous meetings) not to begin tapering in July. However there was discussion of the creation of a reverse repo facility, which could be seen as laying the groundwork for reducing the pace of purchases. Given the committee remains uncertain on the timing of tapering, as a compromise, officials could begin tapering in mid-September with a smaller than expected initial reduction of around $10bn.

European shares fell again on Wednesday, as investors avoided making fresh bets before the Federal Reserve minutes. Trading volumes were relatively light. The Dutch brewer Heineken fell by 4pct after giving a muted outlook. Cyclical stocks were amongst the biggest decliners. The FTSEurofirst 300 index fell by 0.6pct with the German Dax down by 0.2pct and the UK FTSE lost 1pct. Mining shares were weaker with Rio Tinto down by 2.1pct in London trade while BHP Billiton lost 2.6pct.

US sharemarkets ended lower in choppy trading on Wednesday, after the minutes of the Fed´s July meeting offered few new clues on a time frame for a reduction in its bond-buying program. Retailers were in focus, with earnings reports from Lowe´s (up 4.1pct) and Target (down 3pct). The S&P retail index fell by 0.7pct. The Dow Jones fell by 105pts or 0.7pct - the sixth straight daily decline. The S&P 500 gave back 0.6pct and the Nasdaq lost 14pts or 0.4pct.

US long-term treasuries fell on Wednesday (yields higher) after the FOMC minutes. US 2yr yields rose by 2pts to 0.37pct and US 10yr yields rose by 7pts to 2.89pct.

The US dollar rallied against major currencies in European and US trade on Wednesday. The Euro fell from highs near US$1.34.20 to US$1.3345 and ended US trade near US$1.3350. The Aussie dollar fell from highs near US90.50c to near US89.60c and ended US trade near its lows. And the Japanese yen held between 97.30 yen per US dollar and JPY97.95, before ending US trade near JPY97.75.

World oil prices fell on Wednesday, amid signs that Libyan exports might resume. The spread between crude and Brent widened to more than $6 a barrel intraday - the widest since June. Brent crude fell by US34c or 0.3pct to US$109.81 a barrel while US Nymex crude lost US$1.11 or 1.1pct to US$103.85 a barrel.

Base metal prices were weaker on Wednesday with the stronger US dollar adding to weakness across the commodity complex. Nickel lost 2.3pct and copper gave back 1.1pct. Gold fell on Wednesday as the US dollar strengthened with the Comex December futures down by US$2.50 an ounce or 0.2pct to US$1,370.10 per ounce. The iron ore price fell by US$1.20 or 0.9pct to US$137.80 a tonne.

Ahead: In Australia, no major economic data is released. In the US, leading indicators index is released.

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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