Australia Market Report of August 21: Market Firmed by Profit Reports

Sydney, Aug 21, 2008 AEST (ABN Newswire) - The Australian share market had its best day in two weeks yesterday, with the market closing firmly in the black after ovecoming a negative lead from Wall Street.

The benchmark S&P/ASX200 was up 63.1 points, or 1.3%, at 4929.5, while the broader All Ordinaries gained 67.1 points, or 1.36%, to 4997.5.

Analysts said investors were taking their lead from the profit reports of local companies rather than the US. It is expected to go higher today after US stocks had a moderate gain overnight.
At 6.59am, the Sydney Futures Exchange's September share price index futures contract was up 37 points at 4919.

Today the Australian dollar has opened higher after oil prices rose during the overnight session, but gains were limited in quiet conditions. At 0700 AEST, the Australian dollar was trading at $US0.8735/38, up from Wednesday's close of 0.8716/20.

Key Economic Facts and Figures

Commodity prices have fallen sharply lately, but don't count on a market rout. Analysts say the commodity prices will settle at levels below their record levels of earlier in 2008, but still dramatically higher than a few years ago. Commodity prices should remain high enough for companies to continue posting very big profits.

Australia's economy is on track to slow sharply in the next three to nine months, burdened by tight financial conditions and evaporating household wealth. The annualized growth rate of the Westpac Institutional Bank-Melbourne Institute leading index of economic activity slowed to 2.0% in June, from 2.4% in May and 4.0% at the start of the year. The slowdown in the growth rate of the Index can be mainly attributed to the sharp fall in the share market; tighter liquidity as represented by the money supply; weak dwelling approvals and soft data for US industrial production.

The nationwide housing shortage could fuel a new round of illegal rent auctions, the Housing Industry Association has warned. A shortage of 45,000 new dwellings in the current financial year could force people to bid at informal auctions to rent a house.

The Reserve bank of Australia (RBA) will release its monthly bulletin and Australian Bureau of Statistics will issue new motor vehicles sales data from July.

M&A News

Fairfax Media(ASX:FXJ) has sold its 75 percent stake in British film and television production company Carnival for A$48.3 million in a deal with NBC Universal announced last night. The stake was held by Southern Star, acquired by Fairfax late last year for $150 million through the purchase of part of Southern Cross Broadcasting.

Macquarie Airports(ASX:MAP) has taken a big step towards privatisation after announcing the sale of large slices of its stakes in Copenhagen and Brussels airports to fund a A$1 billion buyback of its shares.

Important Corporate News

Lend Lease Corp Ltd (ASX:LLC) has posted a 46.7 per cent fall in annual profit, after booking negative property revaluations and adjustments to the value of UK assets. Net profit was A$265.4 million for the 12 months ended June 30, down from A$497.5 million in the previous year.

Miner Oz Minerals (ASX:OZL) has posted a A$72.3 million half year profit, saying the result would have been better but for volatility in base metals markets. Oz Minerals declared revenue of A$509.6 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of A$215 million.

Santos (ASX:STO) has lifted its first half profit by 57.6 per cent after benefiting from higher oil and gas prices, and has reaffirmed its guidance for the full year. Net profit for the half year ended June 30 was $303.7 million, up from $258.1 million in the previous 12 months.

National Australia Bank Ltd (ASX:NAB) has confirmed it will pass on in full a 25 basis point rate cut if the RBA reduces the official cash rate by that amount. The pledge means NAB would reduce its standard variable interest rate by 0.25 per cent to 9.36 per cent per annum.

Fairfax Media (ASX:FXJ) has lifted its annual by nearly 47 per cent following its merger in 2007 with Rural Press, and says advertising markets have slowed going in to the new year. Fairfax today booked a net profit for year ended June 29 of A$386.9 million, up 46.8 per cent from A$263.51 million in the prior corresponding period.