Australia Market Report of August 1: Investors Eye Positive Signs For August

Sydney, Aug 1, 2008 AEST (ABN Newswire) - Australian shares closed firmly in the black yesterday for the second consecutive day, driven by a positive US lead and higher prices overnight for copper, nickel and oil.

DJ Carmichael research assistant Peter Kopetz said investors remained cautious and would continue to looking for more signs of positivity from company earning reports during the latter part of the profit reporting season in August. More big swings in the US are expected as their profit reporting season continues.

US stocks slumped overnight, ending a two-day rally, as investors weighed a disappointing growth report on the US economy and a surprising rise in weekly unemployment claims. The Australian stock market is expected to fall about 1% today.

Yesterday the benchmark S&P/ASX200 index added 40.7 points, or 0.82 per cent, to 4,977.4 while the broader All Ordinaries gained 43.9 points to 5,052.6. Today at 6.45am on the Sydney Futures exchange, the September share price index futures contract fell 51 points, or 1.02%, to 4927.

Key Economic Facts and Figures

The data released by Australian Bureau of Statistics (ABS) yesterday showed sales for the first half of 2008 had experienced the biggest slumped since records began almost 30 years ago. Economists fear the worst, with some claiming a retail recession has already arrived. The ABS figures show consumers, battered by interest rates, soaring fuel and food prices and rapidly rising rents, have dramatically reined in their spending in almost every category. Retail sales fell 1.0 per cent to a seasonally adjusted $20.04 billion in June from A$20.23 billion in May and rose from A$19.42 billion a year earlier, the ABS said. Analysts expected the prospect that the RBA will cut its official cash rate target, if the slowdown continues to develop as it has over the last few months.

The Australian Building and Construction Commission yesterday released its 2008 productivity report card, in which it said there had been gains across the entire industry. This includes a 7.3 per cent productivity gain in commercial building relative to residential building since 2004, and a 10 per cent increase in labour productivity in the construction industry.

The export sector has defied a strong Australian dollar to post two monthly trade surpluses near each other for the first time in seven years. But high commodity prices rather than a cheaper Australian dollar would drive a new round of expected trade surpluses. ABS data showed a $411 million balance of goods and services surplus for June.

Today, the Australian Industry Group/PricewaterhouseCoopers Australian Performance of Manufacturing Index for July is released. So to the Securities/Melbourne Institute inflation gauge for July and the Reserve Bank of Australia commodity price index for July.

IPO and M&A News

After Just Group (ASX:JST) reported 7 per cent rise in annual sales yesterday, Solomon Lew's Premier Investments pointed out that shareholders representing 12.5 per cent of Just had already indicated their acceptance of its hostile $810 million bid. Premier, which holds a 25.6 per cent stake in Just, hopes to reach more than 50.1 per cent acceptance by the August deadline.

Sinosteel Corp may launch a takeover bid for Murchison (ASX:MMX) Metals Ltd after it won a contract to build an A$3 billion iron ore port and rail project in Western Australia. The company is seeking Australian governmental approval to increase its stake in Murchison to speed up the construction of the mines and port.

Important Corporate News

Mirvac (ASX:MGR) has suspended redemptions for up to six months on three of its Mirvac Aqua mortgage funds -- which had boasted returns of up to 9.5 per cent per annum - as they struggled to repay bank loans. Mirvac was forced to freeze more than A$240 million of funds belonging to hundreds of ordinary investors.

Suncorp Metway (ASX:SUN) will leave its fiscal 2008 final dividend unchanged and has forecast flat dividend growth for fiscal 2009 after bad weather and the credit crunch almost halved its annual profit. The bank and general insurer said it expects its preliminary, unaudited fiscal 2008 annual net profit to be between A$525 million and A$550 million.

NAB (ASX:NAB) chairman Michael Chaney yesterday tried to reassure investors that the bank was on top of its loan book. In response to questions yesterday on whether the bank may need to make further provisions to cover emerging problem loans, Mr Chaney said there was no reason to take such action.

Portman (ASX:PMM) has posted record quarterly and interim earnings, due largely to an almost doubling of the already high prices it receives for the bulk commodity. Portman booked an interim net profit of A$137.1 million, up 140 per cent from the previous corresponding six-month period to June 30. Second-quarter earnings totalled A$119.3 million, an increase of A$91.2 million compared with the June quarter of 2007.