It was another interesting session on the Australian share
market, as investors reacted to fresh sovereign debt worries out
of Europe and a surprise rise in the local unemployment rate. The
All Ordinaries Index (XAO) fell 1.5pct on open, outperforming
near 5pct losses witnessed on Wall Street overnight.
Offshore investors were rattled by speculation France could
have its AAA credit rating downgraded, despite ratings agency
Standard and Poor's indicating such a cut is not on the cards.
Local stocks then rallied on expectations of a rate cut locally
due to weaker than expected jobs numbers. By close of trade the
XAO had fallen 3.9pts to 4203.5 while the S&P/ASX 200 Index
(XJO) was weaker by 0.5pts to 4140.8.
Some 100 jobs were lost in the Australian economy last month,
well below expectations of a gain of 10,000. 22,200 full time
jobs were lost, while working hours increased. The unemployment
rate ticked up from 4.9pct to 5.1pct. Shortly after the data was
released, money markets started pricing in a rate cut. Goldman
Sachs has now forecast rate cuts of up to 50 basis points by year
Financial stocks turned around on this speculation, after
having been heavily sold off in early trade following losses in
European and US banking shares. Westpac (
) added 1.5pct to $20.45 while the National Australia Bank (NAB)
was higher by 0.4pct to $22.90. Shares in the Commonwealth Bank (
) added 0.7pct to $48.58 and the ANZ (ANZ) was higher by 1.5pct
Telstra (TLS) was among the best performers, after the
telecommunications provider reported a better than expected full
year profit. Earnings were down 17pct for the year to $3.2
billion, above expectations of a result worth $3.09 billion.
Telstra indicated it expects improvements in the year ahead,
while 2010/11 was one of its best in terms of attracting
customers. Shareholders will receive a final dividend of 14 cents
per share, taking total payouts for the year to 28 cents, in line
with guidance. Telstra shares were among the best performing
today, adding 5.7pct to $2.99.
Meanwhile, rival Optus reported a 5pct drop in first quarter
profit. Optus is owned by Singapore Telecommunications (SGT),
which fell 2.1pct to $2.33 on the market today.
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Retailer David Jones (DJS) fell sharply, after issuing a
profit downgrade. The upmarket retailer posted a 10.3pct fall in
fourth quarter sales to $462.1 million and indicated it's not
seeing any signs of improvement in the first quarter of 2011/12.
DJS shares fell 6.4pct to $2.62.
Other retailers also slumped. Myer Limited (MYR) fell 5.8pct
to $2.12 while Kathmandu (KMD) was off 2.5pct to $1.57. However
JB Hi-FI (JBH) shares gained 1.5pct to $15.68.
Gold stocks continued to rally, after the price of the
precious metal rose above US$1800 an ounce during New York trade.
Shares in Australia's largest gold producer Newcrest Mining (NCM)
added 3.8pct to $40.74 while Eldorado Group (EAU) added 6.3pct to
Elsewhere in the materials sector, Alumina (
) fell 5.8pct to $1.79 after its 1H profit fell below market
expectations. AWC reported a 53pct increase in net profit to
US$67.7 million, as demand for aluminium continues to grow.
Analysts were expecting stronger prices for aluminium would have
pushed Alumina's profit even higher.
Back to today's jobs figures and the participation rate held
steady at 65.6pct in July. NSW led the job gains in July (up
19,700) followed by Tasmania (up 1,800) and Queensland (up 800).
Victoria led the job losses (down by 20,700), followed by South
Australia (down 1,700), Western Australia (down 1,500), Northern
Territory (down 800 in trend terms), and ACT (down 400 in trend
"The latest result is also consistent with the anecdotal
evidence we are hearing from businesses outside the mining
sector. Conditions are tough, and the lack of consumer spending
and inherent weakness in the housing sector is filtering through
to other parts of the economy......over the next few months it is
likely that businesses will remain cautious and as such hiring
intentions will be curtailed," CommSec Economist Savanth
Sebastian said of the data.
The Australian dollar had another session of highs and lows,
finishing trade at USD102.7c. It was also buying £0.6345 and
On the market overall, a total of 2.512 billion shares were
traded, worth $7.18 billion. 459 were up, 688 were down and 293
At 4.15pm AEST on the ASX24, the futures contract was at 4096,
up 2pts. The Dow Futures was at 10892, up 167pts or 1.6pct.
Ahead tonight, weekly jobless claims are released in the US.
Trade data is also due while retailer Kohl's is among the
companies reporting, along with chip maker Nvidia.
(From Juliette Saly, CommSec Market Analyst)
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