Afternoon Market Report
The last 24 hours has provided some perspective for global stock indices which have rallied substantially since the end of last year. Corruption allegations levelled at the Spanish Prime Minister Rajoy roiled European markets. Additionally, Italy's former Prime Minister Berlusconi has gained ground in the polls ahead of elections this month. Mr Berlusconi has been campaigning a platform of rolling back current austerity policies.
In each instance the outcome was seen as a potential threat to euro zone stability and growth. These results have reminded investors that risks remain despite the significant progress that has been made in Europe over the last six months.
These developments were the underlying reason for Tuesday's weakness throughout the region where most indices ended in the red. The ASX200 fell 0.51% to 4,882.7 points, the All Ordinaries index dropped 0.54% to 4902There were 1.75 bln transactions worth $5.2 bln. 337 stocks ended higher, 598 ended down and 396 were unchanged.
The local reporting season got off to an inauspicious start thanks to hearing implant maker Cochlear. The group, which sells a number of high-tech hearing implants in more than 20 countries, has about two-thirds of the global market for hearing implants used by profoundly deaf adults and children. Cochlear reported a net profit of $77.7m, up from a $20.4m net loss in 2011/12. Revenue reported was $391.7m, up 1% from $387.5m Earnings per share were $1.366, compared to a loss of 35.9 cents previously. A dividend of $1.25 per share was declared up from $1.20. The result was lower than expected with the group highlighting the headwinds being created for exporters by the high Australian dollar. Another factor impacting the groups decline on Tuesday turned around the lack of clarity in relation to when its CI500 series implant would return to the market following a recall in September 2011, the implant was withdrawn from sale because of water entering the device. Consequently Cochlear made a provision of a$100.5 million last year. The group said that no date has been set for the CI500´s reintroduction as the company planned to move production to its facility at Sydney´s Macquarie University. Regulators in the U.S. and Europe have advised that sufficient action has been taken to correct the fault, although further approvals are required before it can return to the market. The shares finished at $72.96 down $7.50 or more than 9%. Elsewhere in the sector Resmed was steady at $72.96, Blood products group CSL closed at $54.89 up 39 cents or 0.72%.
Consumer Staples were the only group to end higher, Woolworths finished at $31.78 a gain of 17 cents or 0.54%,Metcash settled at $3.80 down 1cent or 0.26%, Wesfarmers rose 42 cents or 1.12% to $38.03.
The main news story of the day came with the RBA leaving rates on hold. This came as little surprise to the markets which had been pricing a 1 in 5 chance that the central bank would cut rates. This is a marked contrast to the markets pricing at the end of last year where a 2 in 3 chance of rates being cutwas being priced. Conditions globally have improved significantly. This has been reflected in the risk that has been priced out of the market over the course of recent months. In fact since November last year the ASX200 has gained as much as 14%. CommSec believes that the Reserve Bank will maintain an easing bias despite leaving rates on hold. Further rate cuts are unlikely in the near term unless a left field event takes place such as a deterioration of conditions in the euro zone debt crisis. It's more likely that Reserve Bank will talk down interest rates rather than actually cutting rates and moving even further
away from neutral or "normal" settings. It's reasonable to conclude that rates have bottomed or are very close to the low point of this cycle.
The impact of the RBA's decision on banks was at the margin today.The ANZ was the only one of the big 4 nabks to end higher after a gain of 9 cents or 0.34% to $26.64. The CBA closed at $64.30 down 41 cents or 0.63%, the NAB ended trade at $27.79 a loss of 26 cents or 0.93%, Westpac finished with a deficit of 2 cents or 0.07%. Amongst the regionals Bank of Queensland ended down 12 cents or 1.40% at $8.48, Bendigo Bank closed at $9.39 up 6 cents or 0.6%.
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