Australian Stock Market Report – Afternoon 1/29/2013

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Afternoon Report (17:30 AEDT)

Having risen 1.3% last week ,the local share market maintained its constructive note, rising by more than 1 on the Tuesday, the first day of a holiday shortened week . The Australian stock market tradeded at new 21-month highs despite the news pulse from US and European hemespheres being less than positive.Every sector measured by the ASX registered solid gains. The impact of the east coast storms was the main focus for insurers and miners as investors attempted to 'bottom line' the matter. In short, the impact on insurers will be substantially less than the Toowoomba/Brisbane floods of 2011 and the damage levelled by Cyclone Yasi in the same year. Early reports suggest that in the majority of cases, production at most mining assets in QLD will not endure any lasting delays as a consequence of the recent storms.

The ASX200 rose by 0.79% to 4873 , at the same time the All Ordinaries index rose 0.77% to 4896. Turnover was a very respectable with just over 2 billion transactions being registered valued at $5.6 billion. 571 issues ended higher, 435 closed with a loss and 367 were unchanged.

Insurance stocks suffered predictable pressure in the face of flood events in many jurstictions on the east coast. An expected surge in claims saw most of the selling come to bear on Suncorp which owns brands such as AAMI and GIO. The insurer has a provision of $520 million for natural disaster events in fiscal 2013. In the first half, natural hazard claims totalled $147 million, meaning that the group has significant scope to manage sizeable claims. Its important o consider that the weather event seen over recent days is modest by comparison with an estimated 5000 dwellings impacted compared to 80,000 in the previous major event. Suncorp fell almost 2% to $10.65. Insurance Australia Group dropped 2.2% to $4.82, QBE fell 2.5% to $11.30.Elsewhere in the financial sector , the big four banks all rallied. ANZ Banking Group rose 1.7% to $26.51, CBA gained 1.8% to $64.73, the National Australia Bank moved ahead by 1.8% to $27.72, Westpac finished with a 2.4% improvement to $28.22. Investment bank Macquarie Group rose 0.6% to $38.22.

Still on a weather related theme, coal miner Yancoal Australia fell 0.54% to 92.5 cents.The miner announced that production had been stopped at its Middlemount and Yarrabee open cut mines in Queensland. BHP and RIO both offered modest detail in relation to the weather impact on their respective operations. The main takeout being that any management was controlled in nature rather than being a 'force majeure' event. BHP Billiton rose 0.2% to $37.17, Rio Tinto improved 0.14% to $66.15, Fortescue Metals Group ended 2.8% better at $4.69. Amongst energy the players Santos dropped 0.25% to $11.82 and Oil Search was up 1.3% to $7.20.

There was no major economic news to examine today,although the sharp improvement in business confidence captured headlines briefly. Historically this measure has been instructive in marking cycle turning points. However, the continuing low level of most indicators in the NAB survey suggests a major turnaround in rates is not on the horizon. The monthly NAB business survey showed a modest rebound in business conditions from 3 year lows. The broad conditions index edged slightly higher from -6 to -4. The improvement in confidence was far more significant,that measure rose from -9 to +3. A lower cash rate, rebounding equities and the safe passage of the US fiscal cliff have likely contributed to the marked improvement in the confidence measure. The continued weak reading in the conditions index does not bode well for near term activity in Australia.

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