Australian Stock Market Report – Afternoon 5/17/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket ended a little lower today, despite a positive start to the session. The ASX200 Index (XJO) fell 0.2 pct or 8.1 pts to 4157.4. Early in the session, investors seemed encouraged by news that the Japanese economy grew at a faster than expected pace last quarter. Japan is Australia's second largest trading partner and accounts for around 12.3 pct of all goods and services exported overseas.

Today the energy, mining, industrials and utility company ended higher while all other sectors finished in the red. Since the Greek elections took place less than a fortnight ago, the Australian sharemarket has fallen by more than 5.5 pct. Yesterday was the worst single day of losses for our market in 2012.

The miners have been out of favour with investors, with the sector plummeting by close to 10 pct over the previous 10 sessions. That is almost twice as bad as the broader sharemarket. Today however, BHP Billiton (BHP) ended 0.86 pct or 28 cents higher to $32.77, while iron ore miner Fortescue Metals Group (FMG) rose 1.45 pct or 7 cents to $4.91. Not including today's gains, FMG has slumped by more than 12 pct over the previous four sessions.

Commonwealth Bank of Australia (CBA) recorded a $1.75 billion cash profit in the previous quarter which was a touch lower than market expectations. Higher funding costs continue to negatively impact margins for the big banks. CBA ended 1.45 pct or 75 cents lower to $51.02. Westpac (WBC) was the worst of the big four and slumped by 2.12 pct or 46 cents to $21.22.

The uncertainty in Europe has been one of the main drivers of the weakness in markets with the Greeks unable to form a government ten days after the Presidential elections. They will now need to return to the polls on 17 June to nominate a President. A senior judge has been sworn in as Greece's caretaker Prime Minister for the time being.

Last night, the head of the International Monetary Fund (IMF), Christine Lagarde said that key European leaders still want Greece to remain in the Eurozone. If Greece were to leave the Eurozone, some have estimated losses of around €400 billion in losses initially (not taking into account the longer term financial costs).

A number of companies held their Annual General Meetings (AGMs) with shareholders including Adelaide Brighton (ABC), a cement and lime supplier to the construction industry. Ivanhoe Australia (IVA) and ROC Oil (ROC) were two other big names to meet with investors.

No major economic data was released today and tomorrow is expected to be another quiet session for economic news

Shares in the region ended mostly higher today, with stocks in the Philippines the best, up 3.1 pct. The Japanese, South Korean and Chinese markets all finishing higher while Hong Kong's Hang Seng lost a little ground by close. The Japanese economy grew at 1 pct over the first quarter of 2012 and has expanded by around 4 pct on an annual basis.

In Europe tonight, a 10-year Spanish bond auction will be held while France, Germany and Switzerland are all having bank holidays.

In the U.S tonight, the Federal Reserve minutes from the April meeting will be released. Hints of further potential stimulus measures could see a rebound in stocks take place. The weekly report on unemployment claims will be released tonight and a slight rise is expected. This measures the number of Americans filing to receive jobless benefits for the first time in the previous week.

The pricing for shares in social media giant, Facebook will take place tonight one day prior to the scheduled listing date. Due to significant demand for its shares, the company announced it would boost the number of shares available to investors by around 25 pct. The Initial Public Offering (IPO) has been heavily oversubscribed.

Facebook is expected to have a value (market capitalisation) of around US$100 billion. That would make it approximately half the size of Google (GOOG;us) but around four times larger than Google was when it first entered the market back in 2004.

Facebook is likely to be approximately the 60th largest company on any sharemarket globally. Should its market capitalisation be around US$100 billion, it will be bigger than household names such as McDonalds, Walt Disney and Amazon.

Each Facebook share is expected to end up being priced in a range between $34 and $38 a share. The stock will be listed on the tech specific NASDAQ.

The market capitalisation of a company is a popular way to measure the size of a business on a sharemarket. It is calculated by simply multiplying the number of shares the company has on issue by its current share price. Most popular third party websites such as finance.google.com, finance.yahoo.com and www.bloomberg.com have already calculated the market caps of most listed companies on their sites.

Volume of shares traded came in at 1.95 billion today, worth $5.19 billion. 463 shares were up, 485 were weaker and 401 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down 0.34 pct or 14 pts to 4146.

Due to daylight savings, most major European markets are now trading between 5pm (AEST) and 1.30am (AEST). Stocks are expected to open in the black tonight.

Dow Futures are higher, indicating that U.S stocks could open higher tonight. 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 below parity against the greenback for the fourth consecutive day and buys US99.3 cents. The AUD is currently trading at £62.4 pence and €78.08 cents.

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