The Australian sharemarket lost ground for the fourth time in
five days today with the All Ordinaries index (XAO) easing by 0.3
pct or 13.1 pts to 4320.1. This was the first week of losses so
far in 2012. On a positive note, Australian shares have gained by
around 5 pct over the past five weeks.
We did not receive much of a lead from either the U.S or
European markets overnight, hence the choppy session of trade
today. Shares were down by as much as 0.35 pct at one point today
and gained by as much 0.16 pct earlier in the session.
Almost all sectors ended the day lower with the S&P/ASX
200 Financials index falling 0.45 pct or 18.3 pts to 4009.6. ANZ
Banking Group (ANZ) slumped by 1.17 pct or 25 cents to $21.11 and
was the worst of the big four today. Westpac (
) lost 0.62 pct or 13 cents to $20.79, National Australia Bank
(NAB) eased by 0.59 pct or 14 cents to $23.75, while Commonwealth
) fell 0.18 pct or 9 cents to $50.57.
Commodity prices fell overnight and our largest miners
followed suite. The S&P/ASX 200 Materials index dropped 0.17
pct or 19.8 pts to 11629.6, with RIO Tinto (
) losing 0.31 pct or 22 cents to $70.50 while the larger BHP
) ended only 0.05 pct or 2 cents lower to $37.60.
A Qantas Airways (QAN) plane carrying 74 passengers to
Canberra was forced to make a priority landing today due to some
engine trouble. The airline has also increased fuel surcharges on
ticket prices to offset the higher cost of petrol. QAN shares
rose 0.63 pct or 1 cent to $1.61.
On the economic front today, the Federal Chamber of Automotive
Industries reported that 76,783 cars were sold last month which
was a 4.3 pct improvement on a year ago. 4-wheel drives continue
to remain extremely popular with Australians and have experienced
a 29.9 pct increase in sales over the past 12 months.
Commsec Economist, Savanth Sebastian said that "The latest set
of data is heartening and may be the clearest indication yet that
last year's rate cuts are starting to take effect. Car sales
recorded the best January result in four years and in annual
terms sales are up just shy of 5 per cent on a year ago. In
addition the services sector recorded its first expansion in four
months. With the key, forward looking, new orders index expanding
at the fastest pace in 26 months. Granted the improvement is at
the margin and comes after a considerable period of weakness but
the data is the timeliest data we have had on activity in the New
Cars are currently at their most affordable levels in around
40 years. Mr Sebastian said that "Car affordability is at the
best levels since the 1970s, and coupled with the recent rate
cuts it seems to have prompted consumers to update their
A report on the state of the services industry called the
Performance of Services gauge was released today and showed that
the services sector has improved for the first time in four
months. Mr Sebastian warned however that "The improvement in the
services sector is just one month and further gains would be
needed to claim a turnaround in the sector. Unfortunately there
are an array of headwinds for the sector including the strength
of the Australian dollar and the lack of consumer activity.
However the pickup in new orders and likelihood of further rate
cuts should support activity levels in coming months."
In the Asian region today, there was no major economic data
released. Singapore Airlines however announced a 53 pct fall in
profit in the third quarter due to persistently high fuel prices.
Net profit between October and December last year fell to US$100
million. Revenue rose by 1 pct while expenses rose by a much more
considerable 12 pct.
Out of Europe last night, the latest reading on the British
and European construction sector showed that the industry is
still remaining weak.
Tonight, the latest European retail sales report will be
released at 9pm (AEDT) for the month of December. The market is
expecting a rise of 0.4 pct at the retail level.
The complex situation in Greece and the broader Eurozone will
continue to remain in focus also. One of the issues the Germans
and other larger European nations have with Greece is the fact
that they struggle with revenue (tax) collection. At the moment,
it seems that there are currently two major potential paths that
the Europeans could follow. The first is that the more troubled
nations within the Eurozone carry out huge reforms, effectively
changing their cultures and the way their people live. This would
make the lives of these struggling nations significantly tougher
and different than in the past however would be the ideal
scenario for the other European nations.
Another option is for a fiscal union to take shape. In a
fiscal union, the collection of taxes and expenditure are carried
out by a central organisation and shared by participating
governments. With this option, the larger nations would have more
power (as they would contribute a bigger portion of the income to
be distributed). This would be an easier option for nations such
as Greece. Having said this, you also have to remember that
Greece, Spain, Portugal, Ireland and the weaker nations would
potentially lose power to an extent. Another option for the
Europeans would be a breakup of the Eurozone.
So far this week, the U.S markets have remained largely
unchanged and have been waiting for the all-important monthly
employment report which will be issued tonight at 12.30am (AEDT).
The market is expecting an additional 150,000 to 185,000 jobs to
have been created in the U.S and for the unemployment rate to
remain at around 8.5 pct in January. Should the result surprise
the market in any way, you would expect investors to react on
sharemarkets in the U.S and Europe tonight. The report will be
out around one hour prior to the open of the U.S markets.
Next week, the Reserve Bank of Australia (
) is expected to cut interest rates for the first time this year
(first interest rate meeting of 2012).
The volume of shares traded came in at 1.89 billion today,
worth $4.22 billion. 533 shares were up, 470 finished weaker and
374 ended unchanged.
At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24
futures contract is up 0.12 pct or 5 pts to 4227.
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 a touch weaker 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 8am (AEDT).
Turning to currencies, the Australian dollar (AUD) buys
US106.9 cents and €81.36 cents. The AUD is currently trading at
Steven Daghlian, CommSec Market Analyst
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