The Australian sharemarket had its worst day of 2012 today,
with the All Ordinaries Index (XAO) slumping by 1.6 pct or 70.2
pts to 4257.2. It was also one of the busiest days on the local
market this month with around $5.8 billion worth of shares
exchanging hands throughout the session.
Qantas (QAN) was one of the best performers today after
recording some better than expected profit results in the
previous half. The airline has said that around 500 jobs will be
impacted/cut as part of a restructure. QAN shares rose 6.09 pct
or 9.5 cents to $1.65.
Struggling surfwear retailer, Billabong (
) has received a $766 million takeover bid from what is believed
to be a U.S private equity firm. The retailer is currently worth
around $455 million on the local sharemarket (number of shares on
issue multiplied by its current share price). BBG shares have
slumped by 65 pct over the past six months however were placed in
a trading halt today at the request of the company. This is
pending the release of an announcement by the business.
The big four banks lost ground today, with Westpac (
) the worst following a trading update. WBS shares slumped by
3.53 pct or 74 cents to $20.22, ANZ Banking Group (ANZ) dropped
by 2.3 pct or 50 cents to $21.20, National Australia Bank (NAB)
lost 1.82 pct or 42 cents to $22.63 while Commonwealth Bank (
) fell 0.76 pct or 38 cents to $49.85.
The miners were the worst performers of the day and fell by
over 2 pct as a sector. Rio Tinto (
) fell 2.31 pct or $1.59 to $67.28, BHP Billiton (
) dropped 2.22 pct or 80 cents to $35.30 while iron ore miner,
Fortescue Metals (FMG) slumped by 3.98 pct or 22 cents to
Today was the busiest day of the reporting season to date. The
ASX Limited (ASX), the operator of Australia´s main sharemarket
posted a $175.6 million profit in 1H12 (July to December 2011).
This was largely in-line with market expectations but the company
has signalled it expects market conditions to remain challenging.
The ASX has essentially enjoyed a monopoly of Asia Pacific´s
fourth largest sharemarket for more than 20 years, however now
has new competition to deal with. Chi-X is an alternative market
which was launched last year. Its introduction is yet to impact
ASX´s bottom line significantly.
The interim dividend of $0.928 share will be paid to eligible
shareholders on March 21 and is in-line with forecasts. This is
the first profit result with Elmer Funke Kupper, the company´s
new Chief Executive at the reigns. ASX shares edged higher by
0.23 pct or 7 cents to $30.40.
Wesfarmers (WES), a diversified company with interests in
everything from coal mining to home improvement businesses
delivered a lower than expected 1H12 (July to December 2011)
profit result of $1.17 billion. Close to 60% of Wesfarmers´
revenue came from its Coles supermarket business, with earnings
from Coles rising by 14.1% over the period. Around 30% ($8.8
billion) in sales can be attributed to its home improvement and
department store businesses (including Target and Kmart). Its
insurance division was impacted negatively by a high level of
catastrophe claims from natural disasters such as the 2011
WES has declared a fully-franked interim dividend of 70 cents
a share, which will be paid to eligible shareholders on March 30.
Looking ahead, WES said it remains optimistic for it retails
businesses, but expects conditions to remain challenging over the
short term. WES shares fell 2.55 pct or 76 cents to $29.09
Wealth manager, AMP Limited (AMP) posted a net profit of $688
million for the full year (Jan to Dec 2011). This was short of
market expectations and was 11.2% lower than in the corresponding
period last year. It is pertinent to point out that this result
also includes the M&A transaction and integration costs
relating to its merger with AXA on March 30, 2011. AMP will pay
out a 14 cent a share final dividend to eligible shareholders on
April 5. This takes the full year dividend payout to $0.29 a
share, which is largely in-line with market forecasts.
Looking ahead, the wealth manager has revised its dividend
target payout ratio from a previous 75%-85%, down to 70%-80% of
its earnings. This is to meet AMP´s capital requirements for its
AXA business. This essentially means that it will be reserving
less of its profits to distribute to shareholders. AMP shares
have gained around 7.8% this calendar year. No guidance was given
for the FY12 (Jan to Dec 2012). AMP shares fell 2.28 pct or 10
cents to $4.29 today.
On the economic front today, a report showed that there were
46,300 jobs created in January, while the unemployment rate
improved from 5.2 pct to 5.1 pct. This was significantly better
than the market's expectations that 10,000 jobs were created last
It is important not to be blinded by one month of positive
employment numbers however. Commsec Economist, Savanth Sebastian
said that "At first glance the latest employment figures are
heartening - a pickup in jobs across the economy. But the result
needs to be put into perspective. The job losses in December were
revised higher to show almost 36,000 positions were cut, and in
effect the January result just negates those losses. What is
clear is that the labour market is going sideways. Yes it was
encouraging that employment grew in January but looking forward a
sustained pickup in employment will be needed to justify a
turnaround in the fortunes of job seekers."
There were less hours being worked by employees over the month
and most of the job gains flowed through to part-time jobs rather
than full-time positions. The ACT currently has an unemployment
rate of 3.7 pct (the lowest in Australia), followed by Western
Australia and the Northern Territory at 4.2 pct, South Australia
and Victoria at 5.1 pct, NSW at 5.2 pct and Queensland at 5.4
pct. NSW's jobless rate actually improved from 5.6 pct in
In Asia yesterday, the head of China's central bank made
favourable comments regarding the Eurozone at an exhibition on
the Euro in Beijing. Amongst other things, he said that China
will continue to invest in European government debt and that
China remains confident the European nations will find a way to
solve the debt crisis. Markets in the region started improving
following the commentary yesterday and got the Europeans off to a
positive start to trade last night.
Today, there was no major economic data released in the
In Europe last night, some better than expected economic
growth readings out of France and Germany added to the gains in
Europe while the Italian economy has contracted by 0.7 pct in the
previous quarter (October to December 2011), which was worse than
expected. Part of the reason for the contraction has been the
austerity measures introduced in Italy, which have held back
Tonight, the European Central Bank's (ECB) Monthly Bulletin
will be released at around 8pm (AEDT). This includes the data the
central bank used when making its decision to keep rates on hold
earlier in the month.
Italy's trade balance for December will also be issued at 8pm
(AEDT) tonight and will likely show that Italy has recorded a
€1.21 billion trade deficit over the month. This means that
imports are greater than exports. There will also be a bond
auction taking place in France.
In the U.S last night, markets kicked off the session higher
following some signs that America's manufacturing sector is
improving. The gains did not last however, after speculation that
the Eurozone leaders might delay the next Greek bailout package
until April (following the Greek elections).
Tonight, a number of readings on the housing market will be
released in the U.S. This will include a report on housing starts
for January, which measures the number of properties which have
started being built over the month. The building permits report
will also be issued. This is a forward looking indicator and
gives us an idea how many properties are expected to be built in
The volume of shares traded came in at 2.02 billion today,
worth $5.81 billion. 317 shares were up, 681 finished weaker and
378 ended unchanged.
At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24
futures contract is down 1.9 pct or 80 pts to 4140.
Due to daylight savings, most major European markets are now
trading between 7pm (AEDT) and 3.30am (AEDT). Futures in Europe
are pointing to a slightly weaker start to trade tonight.
Dow Futures are currently lower; indicating that U.S stocks
could open in the red tonight. American markets open at 1.30am
(AEDT). Due to the Americans going back an hour on November 5
last year, U.S markets will be trading between 1.30am (AEDT) and
Turning to currencies, the Australian dollar (AUD) buys
US106.6 cents. The AUD hit a high of US107.39 cents immediately
following the better than forecast job numbers only to lose
ground gradually as the day progressed. The AUD is currently
trading at £68.0 pence and €81.92 cents.
Steven Daghlian, CommSec Market Analyst
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