Australian Stock Market Report – Afternoon 8/8/2012

MARKET CLOSE
(4.30pm AEST)

Local stocks closed higher for the third consecutive session today, boosted by hopes the European Central Bank will soon engage in government bond buying, delivering stimulus to the global economy. European shares rose to fresh four month highs overnight, while US shares also rose in thin trade. By close on the Australian share market, the broader All Ordinaries Index (XAO) had risen by 21.5pts or 0.5pct to 4332.9.

Financial stocks were well supported with the sector adding 0.9pct. Shares in the UK's Standard Chartered Bank fell 16.4pct in Europe after New York´s banking regulator threatened to withdraw its state banking license, claiming the bank hid $250 billion in transactions tied to Iran. However US financial stocks shrugged off that loss, and locally we saw great gains from the banks. Shares in the Commonwealth Bank (CBA) rose 1.4pct to $57.59 while Westpac (WBC) was up 1.9pct to $24.13 and the National Australia Bank (NAB) was firmer by 1.3pct to $25.62. The ANZ (ANZ) firmed by 0.4pct to $23.75.

Mining stocks were also strong, ahead of the release of Rio Tinto's 1H result, which came out after the bell. RIO reported a 22pct drop in first half net earnings to US$5.89 billion, however its underlying profit of US$5.15 billion came in much stronger than expected. RIO shares today closed slightly higher at $54.89. Elsewhere BHP Billiton (BHP) shares gained 0.4pct to $32.28 while Fortescue Metals Group (FMG) firmed by 2.7pct to $4.52. Gold miner Newcrest Mining (NCM) added 2.1pct to $24.40.

Earnings season continues with property developer Stockland Group (SGP) amongst those coming out with numbers today. SGP posted a 35pct fall in full year profit and says real estate markets are set to remain weak in the year ahead. Net profit for the year came in at $487 million, down from $754 million in the previous year, mainly due to falls in property valuations. Managing director Matthew Quinn said new housing market remains soft and lower mortgage rates are not yet having the same positive impact. SGP declared an unfranked final dividend of 12 cents per share, taking its full year dividends to 24 cents, unfranked. The company expects to maintain its dividends in 2012/13. SGP shares today slumped 5pct to $3.24.

There was a better reaction from investors to Computershare's (CPU) result. The world's biggest share registry company, reported a 41pct drop in annual net profit to US$156.5 million amid continued weakness in mergers and acquisitions on share markets. However this had already been factored to market consensus and stripping out one off items, profit came in above expectations. Computershare said it remains well positioned to take advantage of a pick-up in the market, should that occur. CPU shares rose 6.1pct today to $8.

Qantas (QAN) shares today rose 1.3pct to $1.15 after CEO Alan Joyce updated the market on the airline's transformation, which includes the loss of 2800 full time jobs. QAN expects the transformation strategy will save the company $300 million per year. Many of today's outlined full time job losses had already been flagged to the market.

Economic data released today showed the number of new owner-occupier housing loans rose by 1.3pct in June. The value of all home lending rose by 2.4pct with owner-occupier loans up by 1.2pct and investment loans rose by 4.9pct. Construction loans for owner-occupiers rose by 4.9pct in June, marking the best result in almost three years.

Meanwhile, there is further indication that home price have bottomed. The average home loan across Australia stood at $295,500 up for the fourth consecutive month since bottoming out in February. Fixed rate loans accounted for 10.2pct of all loans in June, the weakest reading in nine months.

The Australian dollar lost some ground today after reaching US106c in New York trade. Investors pulled back their positions in the Aussie today ahead of the release of monthly data out of China tomorrow and local employment numbers. Economists tip 12,000 jobs were created in the Australian economy in July, which should leave unemployment at 5.2pct. At 4.30pm AEST, the Aussie was buying US105.43c, £0.676 and €85.11c.

On the market overall, a total of 1.6 billion shares were traded, worth $4.6 billion. 526 were up, 360 were down and 356 were unchanged.

At 4.30pm AEST on the ASX24, the futures contract was at 4280, up 31pts or 0.7pct.

Ahead tonight, productivity and labour costs data is released in the US. News Corporation (NWS) will report at 4pm New York time, 6am AEST tomorrow. Telstra, which fell 2.5pct today to $3.97, also releases its numbers.

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