Australian Stock Market Report – Afternoon 5/25/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket lost ground for the third consecutive day and week, with the All Ordinaries Index (XAO) down 0.6 pct or 25 pts to 4081.2 today. Nine out of 12 sectors finished in the red today and the broader market hit a fresh six-month low. On June 17, the Greeks will need to return to the polls to vote for a President for the second time. Markets are likely to remain jittery leading up to the event.

Iron ore miner, Fortescue Metals Group (FMG) continues to struggle and dropped 3.79 pct or 17 cents to $4.31 today. This makes it five straight weeks of losses and takes the losses in May to 23 pct. Putting this into perspective, FMG is still up around 1.3 pct since the start of the year, which is slightly better than the broader sharemarket (All Ordinaries Index down 0.73 pct since January 2012).

The four major banks all ended lower today, with Westpac (WBC) the worst after falling 1.32 pct or 27 cents to $20.12. Commonwealth Bank of Australia (CBA) dropped 1.2 pct or 59 cents to $48.72, National Australia Bank (NAB) lost 0.77 pct or 18 cents to $23.30 and ANZ Banking Group (ANZ) eased 0.44 pct or 9 cents to $20.38.

David Jones (DJS) was one of the better performers following takeover speculation for the retailer. DJS shares rose 3.18 pct or 7 cents to $2.27, but is down 8.84 pct so far this month (broadly in-line with the sharemarket). Next Thursday, DJS will issue its third quarter sales result.

Earlier in the week, Myer (MYR) said that profit this year is likely to be lower than expected. MYR shares have slumped by 8.37 pct this week alone. It reported a 0.9 pct fall in quarterly sales (13 weeks to 28 April) to $651.1 million.

Construction company, Leighton Holdings (LEI) will build two energy efficient buildings in NSW under a $182 million contract from the state government. LEI shares fell 2.3 pct or 41 cents to $17.45.

There was no economic data issued locally today, in what has been a subdued week for economic news. Next week, the data flow will start picking up however.

On Monday, Reserve Bank Governor Glenn Stevens will be delivering a talk. On Wednesday, the latest retail trade and construction reports will be issued. The monthly report on building approvals and private sector credit will be released on Thursday while an update on Australian home prices will be out on Friday.

Building approvals is a forward looking indicator, meaning that the report can give us an insight into the future of the residential construction sector. One of the first necessary steps when building a property is obviously receiving an approval from the relevant council.

In the region, shares in Hong Kong, the Philippines, South Korea and New Zealand edged higher. Shares in Taiwan and China lost ground.

In Europe tonight, the latest reading on German consumer confidence will be issued for the month of May. It obviously is no secret that the situation in Europe is a little challenging at best and borrowing costs for a number of European governments still remain uncomfortably high. The Greek government cost of borrowing (interest rate it has to pay to investors) is 28.6 pct, followed by Portugal at 11.8 pct, Ireland at 7.02 pct, Spain at 6.11 pct and Italy at 5.54 pct. If there were to be a number of exits from the Eurozone that is also the likely order in which those nations will exit.

It will be quiet on the economic front in the U.S tonight, however the Treasury Currency report will be issued. This provides a detailed review of global exchange rate policies, economic conditions, and central bank and government actions around the world. More importantly perhaps, the report also mentions the nations which it deems (U.S Treasury) to be the biggest currency manipulators.

Next week in the U.S, the biggest report to keep an eye on will be Friday's release of the monthly employment numbers in North America. Economists are tipping the creation of around 150,000 new jobs in May.

Volume of shares traded came in at 1.5 billion today, worth $5.25 billion. 444 shares were up, 490 were weaker and 378 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is up 0.37 pct or 15 pts to 4046.

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 red tonight.

Dow Futures are lower, indicating that U.S stocks could open weaker 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) has fallen by around US7 cents so far this month against the greenback currently buys US97.8 cents. The AUD is trading at £62.4 pence and €77.5 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.

[Kick off your trading day with our newsletter]