MARKET CLOSE (4.30pm AEDT)
After a brief pullback yesterday, the Australian sharemarket benefited from a late surge in American equities overnight. This was following positive comments relating to the U.S fiscal cliff in late trade. The market has been extremely sensitive to comments concerning these budget deficit problems, which U.S parliament has a little over a month to resolve.
The All Ordinaries Index (XAO) jumped by 0.6 per cent or 27.5 pts to 4490.1, improving for the third time this week. This takes the gains for the past four days to a touch over 1 per cent.
A number of Annual General Meetings (AGMs) were held today, from BHP Billiton (BHP) to property groups Lend Lease (LLC) and the similarly sized Mirvac (MGR). BHP's Chairman Jacques Nasser told investors that the operating environment remains challenging for the mining industry due to low levels of growth and uncertainty in global economies. BHP shares rose 0.62 per cent or 21 cents to $34.21.
Competitor Rio Tinto (RIO) announced its plans to make US$7 billion in spending cuts and savings to prop up profit margins. RIO shares rose 0.85 per cent or 48 cents to $57.18. The mining giant seems quietly optimistic over Chinese growth prospects; however isn't feeling quite as positive for both the U.S and Europe. Australia is by far the biggest exporter of iron ore, making up around 40 per cent of global exports each year. Around 98 per cent of iron ore is used for making steel, with the remainder utilised for the production of magnets, paints, chemicals as well a number of other products.
Discount retailer JB Hi-Fi (JBH) had a tough day yesterday after announcing plans to trial an expansion into whitegoods. JBH shares fell 1.39 per cent or 14 cents to $9.96 today, taking the falls for the week to 6.04 per cent.
The four major banks improved, with ANZ Banking Group (ANZ) the best performer after rising 1.13 per cent or 27 cents to $24.09. Commonwealth Bank of Australia (CBA) rose 0.78 per cent or 46 cents to $59.44, Westpac (WBC) jumped by 0.8 per cent and National Australia Bank
On the economic front today, data on business investment and new home sales figures were both issued. There was a healthy rise in business investment over the September quarter (July to September), with a 2.8 per cent rise in the value of investment by businesses in buildings and equipment. Investment plans have fallen for the year however and are at their lower levels in 21 years. Business spending is still being driven by the mining sector, with Western Australia and Queensland making up 2/3 of all investment over the quarter.
CommSec Economist Savanth Sebastian said that "The Reserve Bank certainly has some work on its hands to disentangle the various parts of the economy. Mining states remain in strong shape, but non-mining states are still sluggish. However it is not all bad news. The recent rate cuts and the likelihood of further cuts should ensure that sectors such as residential housing should start to gain traction - providing a much needed boost to activity."
The market is currently factoring in a 70 per cent chance of a rate cut next month.
The number of new home sales rose from 15-year lows, jumping by 3.4 per cent in October. Mr Sebastian said that "At face value it is encouraging to see the lift in new home sales. However the sector is only crawling of the weakest levels in 15 years and the latest lift needs to be sustained to claim a full blown turnaround for the sector. Importantly the outlook for the sector is far brighter. Lower interest rates, strong population growth, healthy employment, and pent up housing demand is starting to see the housing sector shake of the shackles and begin a much needed resurgence."
Across the region, retail spending in Japan slipped by 1.2 per cent. Forecasts were centred on a more modest 0.7 per cent fall. Japan is the world's third largest economy, with the Nikkei rising by 0.99 per cent or 92.53 pts to 9400.88.
In Europe tonight, the German unemployment change along with retail PMI (a survey of around 1,000 purchasing managers in the retail sector across a number of Eurozone nations) and a 10-year bond auction in Italy will all be held.
In the U.S, the September quarter economic growth reading will be issued at 12.30am (AEDT) and is likely to be one of the main peices of data out this evening. The market is expecting growth of 2.8 per cent. Weekly jobless claims and pending home sales are also due for release.
Volume of shares traded came in at 1.6 billion today, worth just $4.12 billion. 479 shares were up, 456 were weaker and 388 ended unchanged.
At 4.30pm (AEDT) on the Sydney Futures Exchange, the ASX24 futures contract is up 0.13 per cent or 6 pts to 4495.
Due to the end of daylight savings in Europe, most major European markets are now trading between 7pm (AEDT) and 3.30am (AEDT). Futures are currently pointing to a stronger start to trade tonight.
U.S futures are also pointing to a slightly better open tonight. Due to the start of daylight savings in Australia and its end in the U.S, American markets will now be trading between 1.30am (AEDT) and 8am (AEDT).
Turning to currencies, the Australian dollar (AUD) has lost ground against a basket of currencies overnight. One AUD buys US104.5 cents, is trading at £65.3 pence and €80.7 cents.
Australia is a commodity based economy, with commodities in general accounting for almost 80 pct of all our exports over the past nine months. In essence, when the going gets tough globally, there is fear of less demand for our commodities, which tends to result in a weaker AUD.
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