Australian Stock Market Report – Afternoon 7/23/2012

AFTERNOON REPORT
(4.30pm AEST)

European debt concerns once again weighed on investor sentiment today, causing the local share market to post its biggest once day loss since early June. After rising almost three percent over the course of last week, the best weekly gain since December, the share market today fell 1.7pct on the back of losses on European and US share markets. That was the biggest one day drop on our market since June 4th. Fears the European debt crisis continues to grow saw investors bail out of equities across Asia as well, with Hong Kong's Hang Seng Index down 2.6pct at one point during trade. By close, the All Ordinaries Index (XAO) fell 71.4pts or 1.7pct to 4159.2.

Mining and energy stocks were amongst the worst performers, after commodities were heavily sold off on the London Metals Exchange on Friday. Index leader BHP Billiton (BHP) closed down 2.6pct to $30.55 while Rio Tinto (RIO) was off 3.5pct to $51.52. Iron ore miner Fortescue Metals Group (FMG) closed down 7.1pct to $4.05 while gold miner Newcrest Mining (NCM) fell 4.1pct to $20.94.

Financial stocks also came under pressure, with the sector lower by 1.1pct while energy stocks slumped to the tune of 2.5pct.

Supermarket giant Woolworths (WOW) bucked the trend, rising 1pct to $27.89 after impressing the market with annual sales numbers, thanks to a bumper fourth quarter. Despite subdued retail conditions and slumping consumer confidence, Woolworths saw annual sales rise 4.7pct to $56.7 billion. Food and liquor sales were up 3.8pct on the year, while home improvement sales were up almost 25pct and petrol sales rose 11.4pct. CEO Grant O'Brien says the last quarter of the financial year in particular was very strong, and offset what had been a challenging year elsewhere, citing the unseasonably cold and wet summer for a slump in previous quarter sales. Rival Wesfarmers (WES) shares today rose 0.2pct to $32.10.

Elsewhere, breads and spreads producer Goodman Fielder (GFF) has announced it expects its full year profit to come in at the lower end of guidance due to challenging trading conditions. GFF is also expected to take a $110 million hit due to the valuation of its Australia / New Zealand baking arm, while redundancy and restructuring costs due to consolidation of those businesses will be a further $70-75 million. GFF shares today closed down 5pct to $0.47.

Building products supplier Alesco Corporation (ALS) fell 0.5pct to $2.03, after instructing shareholders to reject an increased takeover offer from paint group Dulux (DLX). DLX today offered $210 million for ALS, or $2.05 per share plus up to 18c per share in franking credits attached to dividends.

The Australian dollar remained subdued against the greenback today and at 4.30pm AEST was worth US103.01c. However the weakness in the Euro saw the Aussie at near records against the European currency, buying €85.2c. It was also worth £0.6623.

According to the Australian Institute of Petroleum the national average retail petrol price rose by 1.8 cents to 136.2 cents a litre in the past week. CommSec expects the national average retail petrol price (pump price) to rise by a further 5 cents a litre in the next 7-10 days. Wholesale prices have risen by just under 10 cents a litre since bottoming out three weeks ago, while retail prices have only risen by 2.3 cents in the last fortnight.

Meanwhile, the broad measure of business inflation - the producer price index (PPI), or final stage prices, - rose by 0.5pct in the June quarter. The result was above forecasts for a 0.3pct rise. The rise in business inflation was largely driven by the depreciation in the Australian dollar over the quarter. The prices for domestically produced goods rose by 0.3pct while import good prices rose by 1.9pct.

"There has been modest improvement in the domestic economy over the past month; however the ongoing concerns surrounding Europe and the slowdown in China will continue to weigh on Reserve Bank thinking," CommSec Economist Savanth Sebastian said of the data.

"The Reserve Bank has plenty of scope to cut interest rates and shore up confidence, and we anticipate policy makers will look to do just that in the next couple of months - that is, reduce interest rates by a quarter of one per cent."

On the market overall, a total of 1.38 billion shares were traded, worth $3.34 billion. 245 were up, 653 were down and 347 were unchanged,

At 4.30pm AEST On the futures market, the SFE 200 Futures was at 4089, down 76ots or 1.8pct.

Ahead tonight, the National Activity Index is released in the US. More than 50 companies release earnings results including McDonald's.

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