MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket extended its falls in the second half of trade today, with the ASX 200 index (XJO) down 1.9 pct or 86.9 pts to 4495.4 while the broader All Ordinaries index (XAO) slumped by 1.8 pct or 83.3 pts to 4563.5. Almost all regions of the market ended lower with the exception of the coal producers.

This takes the falls for the week so far to around 3 pct off the back in part to the weak monthly jobs report out of the U.S on Friday and renewed debt concerns in the Eurozone overnight.

The S&P/ASX 200 Materials index is down 1.76 pct or 239.4 pts to 13369.1. Australia's largest miner, BHP Billiton (BHP) lost 1.9 pct or 84 cents to $43.46. The world's third biggest resource company, RIO Tinto (RIO) slumped 2.13 pct or $1.77 to $81.43.

The S&P/ASX 200 Financials index ended down 2.3 pct or 96.8 pts to 4119.9. National Australia Bank (NAB) closed 3.71 pct or 92 cents weaker to $23.88 hitting its lowest level in calendar year 2011 today. ANZ Banking Group (ANZ) finished lower by 2.23 pct or 48 cents to $21.08 trading at its worst level since July 2010, Commonwealth Bank of Australia (CBA) dropped 1.8 pct or 91 cents to $49.64 and Westpac (WBC) slumped by 2.08 pct or 45 cents to $21.14.

On Monday, shares fell 1.5 pct wiping out last week's gains and today's falls has taken the market back to the lows hit on June 28 last month. Following the carbon tax announcement on Sunday, several companies have already shared their points of view with the public in relation to the new tax. This includes Australia's largest steel producer BlueScope Steel (BSL) and the world's third largest miner, RIO Tinto (RIO). BSL fell 3.17 pct or 4 cents to $1.22.

The airlines are continuing to pullback. Qantas (QAN) pilots have voted to take industrial action due to job security concerns however have not specified a choice of action. QAN closed down 4.91 pct or 9.5 cents to $1.84 cents. The smaller Virgin Blue (VBA) lost 8.82 pct or 3 cents to 31 cents. Despite its substantial 21 pct gain last week, VBA shares have dropped 11 pct over the past 2 days.

Despite the substantial gains recorded today, it was not all bad news as the coal miners posted considerable improvements by the close. MacArthur Coal (MCC) received a $5 billion takeover offer and gained 36.64 pct or $4.06 to $15.14, hitting its best level in over one year.

The joint bid came from Peabody Energy and ArcelorMittal. Peabody is one of the world's largest coal companies and its coal provides around 10 pct of North America's total electricity and as much as 3 pct of the entire world's electricity. Arcelor is the world's biggest steel producer.

On the rural front, U.S grain markets dropped overnight. Concerns of the global economy's recovery put downward pressure on both agricultural and commodity markets overnight.

International media company, Newscorp (NWS) fell 4.59 pct or 73 cents to $15.19 today, taking the falls for the last two days to 9.2 pct due to the phone hacking scandal by the U.K's biggest tabloid newspaper, News of the World.

Subscription television services provider, Austar United (AUN) rose 2.33 pct or 3 cents to $1.32 today. Yesterday, AUN released an announcement to the market saying that "it has entered into definitive transaction agreements with Liberty Global, Inc. (LGI) and FOXTEL Management Pty Limited (FOXTEL) under which FOXTEL will acquire 100% of AUSTAR."

In an interview today, Andrew Forrest the founder of Australia's third largest iron ore producer, Fortescue Metals (FMG) indicated that the company could be considering listing in either China's Shanghai exchange or the Hong Kong Stock Exchange (HKSE). No official release has been made by the company however. FMG shares dropped 3.24 pct or 21 cents to $6.28 and have dropped by approximately 4 pct since January this year.

On the economic front today, the NAB Business Survey was released and showed that confidence levels in Australian businesses remains weak after a fall from +5.7 to +0.2. A reading above 0 indicates optimism.

Commsec Economist, Savanth Sebastian said that "The latest slide in business confidence is hardly a surprise given the storm of negative influences over the past year. Rate hikes, lack of consumer spending, vagaries of the weather and the strength of the Australian dollar have all played their part. And when you add in the fact that the latest survey was taken before the release of the Federal government's carbon tax you could claim that the current business confidence reading overstates the true situation."

The Australian Bureau of Statistics (ABS) released its data on the average credit card balance for May which came in at $3322.60. Credit card balances have only increased by 2.3 pct over the past 12 months. Mr Sebastian said that "The uncertainty about the domestic economic recovery has seen consumers remain cautious about taking on additional debt. The modest fall in the average credit card balance in May marked the first fall in a May month since 2005. In addition the average balance outstanding on credit cards is continuing to fall in real terms."

Markets in the Asian region were hit hard today, with Hong Kong's Hang Seng down 2.06 pct or 460.83 pts to 21886.4, South Korea's KOSPI fell 1.94 pct or 41.94 pts to 2115.22, Japan's Nikkei 225 index dropped 1.53 pct or 154.53 pts to 9915 while China's Shanghai Composite index lost 1.43 pct or 40.08 pts to 2767.32 by around 4.30pm (AEST) today.

The Bank of Japan met today to make its decision on interest rates and decided to remain on the sidelines for the ninth straight month. Rates in the world's third largest economy have stayed unchanged at less than 0.1 pct.

China will release the majority of its monthly economic data tomorrow. This includes China's latest growth reading which the market is expecting to come in at around 9.5 pct for the quarter (when compared to the corresponding quarter last year). The National Bureau of Statistics will also hold its monthly press conference to deliver a prepared presentation in addition to taking media questions.

Volvo is looking to expand from its long time reputation as a safe and secure maker of cars, especially in the Chinese market. Volvo was founded back in 1927 in Sweden, was sold to Ford Motors in 1999 and China's Zhejiang Geely Holding Group last year. The carmarker is now aiming to increase its sales and render itself more attractive to a wider audience.

Sharemarkets in the Eurozone were hammered overnight, with France's CAC 40 index dropping 2.71 pct, the U.K's FTSE 100 index dropped 1.03 pct and Germany's DAX index slumped 2.33 pct. Despite the significant falls, European markets have been better performers than Aussie equities this year.

Greece has been all over the media recently due to debt concerns and received the ok for its next instalment of the EU110 billion bailout package from both the European Union (EU) and the International Monetary Fund (IMF).

One of the reasons for the slump overnight however, was the continued focus on European debt problems in Italy. Italy's largest banks reacted negatively and fell back significantly. The country's largest bank, UniCredit fell 6.3 pct while its second biggest financial institution, Intesa Sanpaolo dropped 7.7 pct. Italy's sharemarket lost close to 4 pct hitting its lowest point since April 2009.

Julian Assange, the founder of the controversial WikiLeaks website, will appear in a U.K court today to face charges which could see in him travelling to Sweden to deal with rape allegations.

U.S markets dropped by between 1 and 2 pct overnight off the back of continued European debt concerns and the worse than expected jobs growth in the U.S last month.

On a slightly positive note, the U.S reporting season kicked off this morning after American market close for the second quarter (between April and June). Should company results be better than expected over coming weeks, it could act as an effective distraction from the troubles of the world.

The world's third largest aluminium producer, Alcoa (AA;us) was the first big name to announce its results earlier in the day. Despite the aluminium producer's net profit more than doubling in the second quarter, the result was still broadly in line with market expectations. AA;us has remained unchanged on the New York Stock Exchange (NYSE) over the past six months.

There is speculation that one of the world's largest I.T companies, Cisco Systems (CSCO;us) may cut as many as 10,000 jobs or as much as 14 pct of its current workforce to reinvigorate its core business. CSCO shares have dropped 26.5 pct so far in calendar year 2011. Investors will have their first opportunity to react to the profit results later on tonight.

The likes of JPMorgan Chase (one of the world's largest investment banks), Citigroup, Google, YUM! Brands (the owner of KFC, Pizza Hut and Taco Bell), Hotel group Marriot International and toy maker, Mattel will all release their second quarter earnings results this week.

Off the back of weaker commodity prices overnight, the North American and European miners were hit hard.

Activity picked up a little today, with the volume of shares traded coming in at 2.89 billion today, worth $6 billion. 240 shares were up, 871 finished weaker and 307 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down 2.06 pct or 94 pts to 4466.

Most major European markets trade between 5pm (AEST) and 1.30am (AEST). Futures in Europe are pointing to a weaker start to trade tonight.

Dow Jones futures are lower, indicating that U.S shares will start in negative territory when American markets open at 11.30pm (AEST).

Turning to currencies, the Australian dollar has weakened by close to 2 cents against the American dollar this week. It currently buys US105.5 cents, JPY84.29 and EUR75.92 cents.

One of the best performing shares was Transol Corporation (TNC), which rose by 100 pct or 0.1 cent to 0.2 cents today. TNC is a small company involved in multimedia services and technologies, was first listed in 1999 and has a market capitalisation of $2.29 million.

Steven Daghlian
Commsec Market Analyst