After a flat start to the week, the Australian market lost ground, with the All Ordinaries Index (XAO) falling by 0.7 per cent and finishing well below 5100.0. It was always going to be challenging to buck the trend from last night, with both US and European equity markets losing ground. The Dow Jones Industrials fell by 0.5 per cent overnight, dropping for the 12th time in 16 sessions.
It was a busy day for company profit reports today, with the likes of BHP Billiton (BHP), QBE Insurance (QBE) and National Australia Bank (NAB) providing either trading updates or profit results throughout the day.
BHP reported a lower than expected US$10.88bn profit for the FY13 (July 2012 - June 2013). Lower commodity prices (in particular iron ore); continue to be a drag for the major miners. BHP issued this result shortly after the market close today.
Australia´s largest listed insurance company, QBE Insurance (QBE), announced a worse than expected 1H13 (Jan-June 2013) net profit of $477m. The result was held back by lower investment returns and a fall in earnings across 4 of its 6 markets. Cyclone Oswald, which made its way through QLD & NSW in Jan cost QBE US$72m (biggest natural disaster expense of 1H13). Rio Tinto's landslide was 3rd on the list - costing US$43m. The recent strengthening of the US dollar & a rise in bond yields is a positive for QBE, as close to 20% of its investments are held in govt. bonds. A $0.20ps dividend was announced, payable to eligible shareholders on QBE shares fell by as much as 9% today.
In the August release of the RBA's minutes, it seems clear that the central bank is in 'wait and see' mode in regards to interest rates. Rates were cut to fresh 53-yr lows earlier this month, however the market is pricing in just a 7% chance of a cut in September (unlikely in election month).
At the close, 2.02 billion shares changed hands, worth $4.84 billion. 397 stocks finished higher, 541 ended in the red and 312 closed flat.
Looking ahead tonight is likely to be an uneventful session in relation to economic news. German PPI (business inflation) is a report of note in Europe. In the US, the weekly report on chain store sales and a reading by the Chicago Federal will be the highlights.
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