Australian Stock Market Report – Afternoon 12/4/2012

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By Tom Piotrowski, CommSec Market Analyst | December 4, 2012 6:44 PM EST

Afternoon Market Report
(17:00 AEDT)

The ASX200 attempted a rally in the first half hour of trade although the move faded quickly and the index lost ground over the remainder of the session. The weaker economic pulse from the US in addition to the war of words between politicians in relation to the fiscal cliff allowed sellers to get traction over regional indices, the majority of which ended in negative territory at the conclusion of the regional session.

S&P/ASX200 slipped 0.62% or 28 points to 4503, the All Ordinaries index fell 0.62% or 28 points to 4511 at the end of trade. 1.28 billion shares were traded with a value of $3.38 bln. stocks ending higher numbered 343,614 finished lower and 353 were unchanged.

Interestingly stocks made new lows following the RBA decision to cut rates by 0.25% to 3% and the Aussie dollar went on to make new highs. The opening sentence from the RBA's accompanying statement sums things up. 'Global growth is forecast to be a little below average for a time. Risks to the outlook are still seen to be on the downside, largely as a result of the situation in Europe, though the uncertainty over the course of US fiscal policy is also weighing on sentiment at present'. The take out being that the risks to the bigger and smaller pictures remains to the downside and there is little risk to the outlook for inflation in cutting interest rates. The Bank goes on to say 'In Australia, most indicators available for this meeting suggest that growth has been running close to trend over the past year, led by very large increases in capital spending in the resources sector, while some other sectors have experienced weaker conditions. Looking ahead, recent data confirm that the peak in resource investment is approaching. As it does, there will be more scope for some other areas of demand to strengthen´. The point being made here is that the slowdown in the resource sector has created room for the RBA to help support other sectors of the economy through lower rates, room which didn't exist when the resource sector was still expanding.

Another outcome that went hand in glove with today's rate cut were figures describing the Governments participation in the economy. Figures on Government Finances, showed that Government spending fell by 0.4 per cent in the September quarter after rising by 1.3 per cent in the June quarter. Total public investment slumped by 8.2 per cent in the September quarter after falling by 4.7 per cent in the June quarter. Overall, spending by the government sector fell by 2.0 per cent in the quarter. The Federal Government's commitment to achieving a budget surplus, in addition to the slowdown in the resource sector, has one been key contributors to the RBA cutting rate. The risk for rates remains skewed towards the downside.

Most sectors ended in negative territory Healthcare was the only group to end higher albeit by a small margin. Blood products group CSL (CSL) continues to be supported by positive industry dynamics which led to last improved profit guidance for 2013 to a 20% increase, compared to an earlier estimate of a 12% increase. Demand for CSL's immunoglobulin products is growing at a rate of 7% to 9% in the U.S. market. An important factor helping CSL at present is that its main competitor in the U.S, Baxter, is experiencing supply difficulties because of plant refurbishment. CSL closed at $53.40 up 46 cents or 0.87% Cochlear (COH) ended at $74.77 down 46 cents or 0.61%, Resmed (RMD) settled at $3.90 down 5 cents or 1.27%, Ramsay Healthcare (RHC) finished at $26.55 down 22cents or 0.84%.

Archer Daniels Midland have increased their offer in GNC to $12.20 and bought another 5% stake in the company overnight taking their holding to 19.9%. The revised bid of $2.78 billion is marginally higher than the $2.68 billion that was rejected a month ago. Graincorp (GNC) shares closed at $12.32 up 38 cents or 3.19% the underlying sense in the market being that the new bid will be rejected.

One of the main releases in tonights session will be the private employment report produced by the ADP group which is the largest processor of paychecks to the US private sector.There is a risk that ADP report produces weaker employment than the 125,000 lift in jobs that is expected given the disruptions Super Storm Sandy caused to activity in early November.

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