Australian Stock Market Report – Afternoon 6/8/2012

MARKET CLOSE
(4.30pm AEST)

The Australian sharemarket lost ground for the first time in four days today, with the All Ordinaries Index (XAO) falling 1.1 pct or 45.5 pts to 4111.2. Shares have only fallen by 0.14 pct over the past five days however. All sectors lost ground, however some of the miners performed strongly. Markets have been treading water ahead of the all-important Greek elections on 17 June.

This week has been more exciting for Economists than Santa's arrival is to a six year old. Almost every piece of economic news has been better than expected over the past five days. The Reserve Bank of Australia (RBA) cut rates for the second straight month on Tuesday, the Australian economy grew at 1.3 pct over the previous quarter (around 70 pct better than expected) and there were 44,000 more jobs created last month than expected.

Aristocrat Leisure (ALL) said that a new casino opening in the U.S this year should give sales of its slot machines a boost. Around 50 pct of its profit is made in the Americas. That is around 20 pct more than Australia. There are around seven million poker machines around the world. Approximately 70 pct of the average casino's income in the U.S comes from Pokies. ALL shares rose 1.06 pct or 3 cents to $2.87.

Qantas (QAN) was one of the worst performers today, with its shares down 8.49 pct or 9 cents to 97 cents. Its shares have slumped by around 40 pct over the past six sessions.

The miners did well, with BHP Billiton (BHP) gaining 1.04 pct or 33 cents to $31.91 while Rio Tinto (RIO) edged higher by 0.31 pct or 17 cents to $55.59. Australia's largest gold producer, Newcrest Mining (NCM) plummeted by 4.69 pct or $1.21 to $24.57.

Economic data continued to surprise today, with both the trade deficit and home loans report coming in better than forecast. Australia recorded a $203 million trade deficit last month, which was significantly better than the $900 million deficit expected.

Commsec Economist, Savanth Sebastian said that "Australia's trade deficit narrowed substantially in April, and it was due to a combination of factors. Not only did exports outpace imports, but a pickup in volumes and prices of key mining exports helped the deficit improve by over $1 billion. The recent weakness in the Australian dollar will improve the competitiveness of our exports. And it will be interesting to see if the dollar weakness results in businesses pulling back from importing capital goods. Capital equipment imports have been growing at a staggering 24 per cent over the past year. The strength in capital investment at favourable prices has been great news for businesses ensuring that costs remain subdued while having the ability to drive growth plans over the coming year. Looking forward, trade surpluses are still likely although the vagaries of the commodity cycle, strength in the Australian dollar, and growth in consumption and investment goods are likely to depress the magnitude of any surpluses. Over the longer term the strength of the Asian region will play a key part on Australia's trade position. The recent rate cuts and further additional stimulus by Chinese authorities should ensure that volumes of coal and iron ore exports will increase over time and support the shift back to surplus."

Next week will be a little quieter on the economic front; however a number of key figures will be issued. Lending finance, credit and debit card statistics, consumer confidence and detailed labour statistics will all be released.

In Asia today, a report showed that the Japanese economy grew at a slightly faster than expected 1.2 pct last quarter. Tomorrow will be the biggest day of the month for economic news in China. The main reports to keep an eye on will be inflation, retail sales and production numbers. This data has the potential to influence Australian trade next week when markets return to trade on Tuesday.

The majority of major economic news out of Europe has already been released this afternoon. Germany posted a better than expected trade surplus of €16.1 billion while France recorded a worse than forecast deficit of €5.8 billion.

In the U.S tonight, the latest trade balance report will be released at 10.30pm (AEST) for the month of April. The market is expecting a deficit of around $49.3 billion.

Volume of shares traded came in at 1.58 billion today, worth $4.17 billion. 359 shares were up, 606 were weaker and 329 ended unchanged.

At 4.30pm AEST on the Sydney Futures Exchange, the ASX24 futures contract is down 0.12 pct or 5 pts to 4067.

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

U.S futures are pointing to a lower start also. 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 pulled back over the past 24 hours. The AUD is trading at US98.4 cents, £63.7 pence and €78.8 cents.

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