Afternoon Market Report
Political machinations and the associated rhetorical bluster continued on either side of the Atlantic in the preceding 24 hours. Outcomes in the related markets were favourable, to wit there was a sizeable drop in long term Greek interest rates along with more modest decline in Spanish and Italian rates. Strong gains for US house prices were registered in October, providing more evidence of the nascent recovery in US Housing.
The struggle to breach 4300 level will still be there today and the challenge to surpass the 4309 level recorded on Monday. The markets will be looking forward to hints for future monetary policy direction to be undertaken by the Reserve Bank of Australia with the release of the February minutes of meeting.
One of the features of regional trade on Wednesday was the strong rally for the Shanghai Composite Index. Not for the first time in recent months,there were suggestions the Chinese leadership will deliver a growth agenda for 2013 in the near term. The performance of the Shanghai market has been causing disquiet lately because of its inability to consolidate having broken down through important support levels.
The S&P/ASX200 rose 0.37% or 16.8 points to 4520, the All Ordinaries index gained 0.36% to 4528, a gain of 16.2 points.
The sector performances was the opposite of yesterday's outcomes. Financials were the best improvers, whilst healthcare stocks underperformed.
Economic news saw the release of one of the week's data highlights in 3rd quarter growth numbers. The GDP figures were a little weaker than expectations for the last 3 months. The economy expanded by +0.5% in the September quarter for annualized growth rate of +3.1%. The quarterly rate was slightly under consensus expectations, which had been for +0.6%.
The report delivered little in the way of insights given the range of data points released over the course of recent weeks. Some observers will make the case that looking into the numbers exposes an economy that is performing poorly as it´s income declines as a result of falling commodity prices. The drop in income suggests that the there is a risk to employment growth. The counterpoint to the weakening employment argument is taxation data.Taxes on individual incomes continue to report strong outcomes and are around 11.3% higher over the year. This suggests that the labour market is actually in a stronger position than what the monthly employment figures suggest.Tomorrow's employment report will provide a reckoning of sorts on this matter, market consensus for jobs growth in November is flat. One of the main determinants in relation to the outlook for local interest rates continues to be the outlook for the northern hemisphere. Economic growth in the US is weak, although there are signs of improvement; witness the housing and employment markets .Even though the fiscal cliff is likely to be resolved in a reasonably timely fashion, it's becoming clear to the markets that any compromise will come at a cost to US growth. The question is what size the cost? The Eurozone remains in a recession and the UK is only slowly beginning to recover from a recession. The risk to Australian interest rates in the first quarter of next year remains to the downside.
Corporate news was thin on the ground in local terms. For some time CommSec has anticipated that the Ten Network would undertake another capital raising, despite the recent sale of its outdoor advertising business Eyecorp. TEN was in a trading halt today having last traded at 32.5 cents as the broadcaster undertook a capital raising.
AURIZON HOLDINGS LTD (AZJ) rose 6 cents to $3.63. The rail operator, formerly QR National, announced the extension of a coal haulage contract with Rio Tinto.
Lynas Corporation (LYC) rose 1.5 cents to 61.5 cents. The rare earths miner said it's facing more legal action in relation to the operation of its Malaysian plant. A Malaysian environmental group is seeking a stay against Lynas´ licence to operate the Plant in Kelantan. The miner indicated that the case put to the court is the same used in previous court actions which were overturned.
ORICA (ORI) fell 18 cents to $23.90. A court heard of the community impact felt after toxic hexavalent chromium leaked from the groups plant in Stockton last year.
Sundance Resources (SDL) shares fell after Hanlong Mining once more delayed its takeover of the iron ore miner. The market has been unnerved by reports that Hanlong is having difficulty securing funding for the acquisition of Sundance. SDL ended 4.5 cents lower at 34.5 cents.
Top tier US economic data is back to centre stage over the remainder of the week starting with the ADP jobs report tonight. The ADP Group are the largest processors of paychecks to the US private sector.
Additionally there will be the release of ISM non manufacturing survey today, a national survey of activity in the services sector. Any impact from Superstorm Sandy or the Fiscal Cliff on these data would undoubtedly impact sentiment.
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