Afternoon Market Report.
The last 24 hours have been quite revealing in terms of the character of the market. From time to time the market discussion has turned to the matter of how well market sentiment is holding up in the face of US political uncertainty and the fiscal cliff. However this matter has been painted in a different light in the last day.The preceding 24 hours have largely been defined by good news. Common ground has finally been found between the IMF and Eurozone finance ministers in relation to the next instalment of Greek bailout funds.
Eurozone unlikely to avoid recession, but outlook improves
Economic news in the US was generally favorable. October Durable Goods Orders were better than expected. Consumer Confidence, measured by The Conference Board, bettered expectations in November. A widely watched measure of US capital city house prices, the Case-Shiller House Price Index, was in line with expectations indicating that the US housing market continues to show signs of better health.
If there was a fly in the ointment to the stream of positive news it was the OECD. It was no surprise that the group lowered its GDP growth forecasts, given that most private forecasters have been revising numbers lower of late. Total OECD GDP growth is now forecast to be up 1.4% in 2012. Similar growth of 1.4% is also expected for 2013, before a modest re acceleration to 2.3% in 2014.
What resonated most with markets however, were comments from an influential US politician. Democratic Senator Harry Reid said little progress has been made in fiscal cliff discussions. He indicated that he was still optimistic that a deal would be struck, but the reminder of the lack of progress cast a pall over sentiment. There are now just 34 days left for US politicians to avoid the fiscal cliff. US Fed Chairman Bernanke recently highlighted that the Fed will not be able to offset the impact of the fiscal contraction.
The take out being, regardless how composed the markets might appear in the face of this matter, it's remains without peer at present in terms of influencing prices.
The S&P/ASX200 index lost 9 points or 0.21% finish at 4,447. The All Ordinaries index fell 10 points, or 0.24% closing at 4,462. Volume remained relatively light for much of the session. 1.5 billion shares were traded valued at $3.4 billion. 386 stocks ended higher, 569 were lower and 363 were unchanged.
Today's economic news showed that the volume of construction work done in the 3rd quarter rose 1.7%, which was slightly below the markets forecast for a 2% increase. Previously reported figures for the 2nd quarter showed a fall of 0.2%. This result was revised up to a rise of 0.9%. Based on these numbers, our estimates suggest annual economic growth of 3.2%, meaning there is nothing here that would see as trigger for the RBA to move on rates at the December meeting.
As far as the various sectors were concerned Insurance Australia Group (IAG)was one of the better improvers amongst the diversified financials closing at $4.55 up 6 cents or 1.3%. Telstra (TLS) shares finished at $4.33 up 4 cents or 0.9%. Sydney Airport Corporation(SYD) rose 0.9% or 3 cents to $3.45. Breads and spreads seller, Goodman Group (GMG) rose 1.3% or 6 cents to $4.65
Underperforming stocks included mineral sands miner Iluka Resources(ILU) which closed at $8.23, down 27 cents or 3.2%. Builder Leighton Holdings fell 2.7% or 48 cents to $17.07. Qantas eased 3 cents or 2.2% to $1.31 Fertiliser maker Incitec Pivot fell 7 cents or 3.1% to $3.07. Ports and Rail operator Asciano fell 9 cents to $4.21 for a loss of 2%
There's light traffic for data releases in the US and Europe tonight. Economic newsflow will cover Eurozone money and credit numbers. In the US, New Home Sales and the Fed's Beige Book should remind investors that the US economy is improving albeit at a modest pace.
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