Australian Stock Market Report – Afternoon 8/9/2012

AFTERNOON REPORT
(5pm AEST)

The Australian share market was on track to post a fourth consecutive session of gains today, however those gains evaporated late in trade after Chinese industrial output and retail trade figures for July came in lower than expected. By close the All Ordinaries Index (XAO) was lower by 2.8pts or 0.1pct to 4330.1, after reaching an intra-day high of 4350.

Chinese CPI (consumer inflation) was also released today, falling to a 30 month low for the month of July, suggesting China's central bank has scope to ease monetary policy further.

Mining stocks were the best performers on the local market, rising on the back of Rio Tinto's (RIO) 1H result which was released after the bell yesterday. Rio's underlying profit beat market expectations, sending its share price up 3.6pct to $56.86. BHP Billiton (BHP), Australia's largest mining company and Rio's rival, rose 1.6pct to $32.80. Iron ore miner Fortescue Metals Group (FMG) closed steady at $4.52.

Telstra (TLS), the country´s largest telco, today announced a 5.4pct rise in its full year (July 2011 - June 2012) net profit to $3.4 billion. This was slightly lower than consensus (market expectations). Impressively, TLS added 1.6 million mobile phone customers over the year and now has 13.8 million mobile customers. In contrast, Vodafone OZ lost 178, 000 customers over the past 6 months. The number of consumers with broadband rose by 203,000.TLS continues to work with NBN Co on the building of its nation-wide network. It has announced a 14c a share dividend payable to eligible shareholders on 21 September. Looking ahead, TLS said it expects modest single digit growth over 2013, and it is TLS´s intention to maintain a 28c dividend over the year. It has paid out at least a 14c/s dividend each half since 2005. Its reliable dividend and profitability have made the telco attractive to investors. TLS has outperformed most companies on the ASX recently, is up over 16% since the start of Jan 2012 and rose by close to 20% in 2011. Its CEO, David Thodey earned $4.8 million over the year. TLS shares today fell 2.3pct to $3.88.

News Corporation (NWS), one of the world´s largest media companies delivered a slightly weaker than expected set of 4th quarter and full year numbers today. NWS posted a US$1.55 billion net loss in the last quarter, but overall posted a lift in revenue for the full year up 1pct to US$33.7 billion. The last financial year was a tough one for NewsCorp with the UK phone hacking scandal costing the company US$57 million in the last quarter alone in addition to the restructure of its publishing division. Publishing profit for the year fell by 31pct to US$597 million, hit by shrinking ad revenue in its Australian newspaper business and the closure of the News of the World tabloid in the UK. NWS´s best performing division was its Cable Network Programming unit, listing a 14pct increase in earnings. NewsCorp announced a write-down of US$2.8 billion due to restructuring and US$1.3 billion in costs relating to its Australian newspaper arm. NWS shares today fell 3.3pct to $21.88.

Financial stocks were generally sold off today, with shares in Westpac (WBC) down 0.5pct to $24.01. The Commonwealth Bank (CBA) shed 1pct to $57.03 while the National Australia Bank (NAB) was down 0.8pct to $25.42.

Employment figures were released today, showing 14,000 were created in July following a revised fall of 28,300 in June (previously 27,000). Economists had expected 10,000 jobs to be added. In July part-time jobs rose by 4,800 after rising by 6,400 in June. Full-time jobs rose by 9,200 after sliding by 34,800 in June.

The unemployment rate eased from an upwardly revised 5.3pct to 5.2pct in July. The participation rate eased from 65.3pct to 65.2pct. The number of hours worked rose by 0.8pct in July to be 0.2pct lower in annual terms.

Chinese retail sales rose by 13.1pct on a year ago (consensus 13.5pct); industrial production was up 9.2pct (consensus 9.7pct); and fixed asset investment over the first seven months of 2012 was up by 20.4pct (consensus 20.6pct).

China's annual inflation rate fell from 2.2pct to 1.8pct in July, a 30 month low. The July result was marginally higher than forecasts centred on a result near 1.7pct. Over the month inflation rose by 0.1pct after falling by 0.6pct in June.

Business inflation (producer prices) fell by 0.8pct in July to stand 2.9 per cent lower than a year ago, a 33-month low.

CommSec believes the slower pace of growth combined with other data showing that inflation is in control gives the Chinese authorities scope to inject further stimulus if necessary in coming months.

The Australian dollar ended the day's trade stronger against the greenback and at 5pm AEST was worth US106c. It was also buying £0.6763 and €85.65c.

On the market overall, a total of 1.45 billion shares were traded, worth $4.35 billion. 427 were up, 388 were down and 392 were unchanged.

At 5pm AEST on the ASX24, the futures contract was at 4275, down 5pts.

Weekly jobless claims are released tonight in the US.

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