Australian Stock Market Report – Afternoon 1/25/2013

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By Steven Daghlian, CommSec Market Analyst | January 25, 2013 7:34 PM EST

Afternoon Market Report
(17:00 AEDT)

Inch by Inch. This sums up the progress of the market over the course of the last 5 days. A series of unspectacular daily gains which yielded a rise of 1.2% for the week. It's precisely this type of weekly improvement that has seen the market advance by more than 10% since the end of November. More than $6.5 Billion in shares were transacted on Friday, a figure substantially inflated by an option expiry the previous day. At its highest point of the session the market hit a fresh 20-month high. The ASX200 index rose 0.52% to 4,835.2; the broader All Ordinaries index gained 0.52% to 4,858.9.

Most sectors ended higher on Friday. The materials sector was a standout for the fact that it was one of 2 groups to end the day lower. Information technology was the other group to lose ground. The weakness in the mining sector was at odds with the positive news flow over the course of recent days. The Chinese flash PMI released by HSBC earlier in the week was at its best levels in 2 years pointing to one of the world's most important economies showing signs of improvement after a year of consolidation. Iron ore prices remain substantial higher than the 3rd quarter of last year. Additionally the Bank of Japan was the latest central bank to lend its balance sheet to the open ended printing of money. The BoJ signalled its intention to open ended asset purchases early in the week. All of these elements ultimately add up to a very supportive atmosphere for stocks in general, although this applies to the resource sector in particular. Today the sector leaders all ended with losses. Rio Tinto fell 0.35% to $66.06, BHP Billiton dropped 0.16% to $37.10, and Fortescue Metals Group lost 1.51% to $4.56. Elsewhere in the sector Atlas Iron was an exception to the rule, rising 0.32% to $1.57. The group confirmed full year production targets after announcing record output during the second quarter.

The energy sector posted a solid gain helped by one of the stand out performers of the week. Linc Energy shares dropped 9.74 per cent to $2.41 following a meteoric rise of 24% on the Thursday. The group has placed a $2 trillion valuation on oil reserves at Arckaringa Basin in South Australia.

The consumer discretionary sector as a whole posted a solid gain. Profit upgrades and the retail sector are uncommon bedfellows although today the Speciality Fashion Group took investors by surprise after increasing its profit expectations. Improvements in supply chain management have been one of the factors leading to reduced product and freight costs. Consequently it expects its net profit to nearly treble for the six months to December 31 to be in the range of $17 million to $18 million. Speciality Fashion vaulted more than 38% higher cent to 97 cents. Pacific Brands lifted to a ten month high up almost 9% to 68 cents. David Jones rose 2.5% to $2.45, Myer ended 2.46% better at $2.50, Harvey Norman was ahead 1% to $1.985, while JB Hi-Fi close up 0.89% at $10.22.

Looking ahead, US markets have a busy data week coming up, culminating with next Friday's non farm payroll report which is expected to show 160 jobs were added to the world's biggest economy. Next week begins with durable goods orders and important measure economic activity measuring the purchase of goods with a life of more than 2years. These items range from lawn mowers at a household level to commercial airliners at the other end of the spectrum. In addition there will be US house sales and GDP figures. Wednesday's FOMC meeting could see more debate about the "open ended" Quantitative Easing measures (money printing)

Locally it is a shortened week for economic releases. Monday's Australia Day holiday will a relaxing opening for the week. The only major releases are international trade prices and RBA's credit data on Thursday followed by Friday's PPI (producer inflation).

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