MIDDAY REPORT
(12.30pm AEST)

The Australian sharemarket is currently trading at its lowest level since July 2009, with the All Ordinaries index (XAO) down 4.5 pct or 181.4 pts to 3875.3. The major U.S and European markets tumbled significantly overnight, leaving us with a negative lead too difficult to shrug off.

All sectors are currently trading in the red, with energy stocks amongst the worst performers. The S&P/ASX 200 Energy index is down 6.91 pct or 878.9 pts to 11848 with the price of oil dropping by 6.4 pct in overnight trade. Nymex crude oil futures have continued their pullback in electronic trade and hit a low of US$75.71 a barrel this morning. Australia's second largest oil and gas producer, Woodside Petroleum (WPL) is 6.54 pct or $2.28 lower to $31.54 while the smaller Santos (STO) is down 6.99 pct or 79 cents to $10.51.

Commodity prices fell considerably in U.S trade with the price of lead down close to 7 pct, nickel and zinc down a little over 5 pct while copper dropped by 2.8 pct. Australia's two largest miners are both falling broadly in line with the market. BHP Billiton (BHP) is down 4.73 pct or $1.75 to $34.88 while the smaller RIO Tinto (RIO) is 6.08 pct or $4.17 weaker to $64.49. BHP is almost four times as large as RIO in terms of market capitalisation (the number of shares on issue multiplied by the current share price).

The four big banks are not being spared from the hefty falls, with the majors down by as much as 5 pct at lunch. In overnight trade, the Bank of America (BAC;us) and Citigroup (C;us) both fell by between 15 pct and 20 pct. Citigroup is around 20 pct larger than CBA in market capitalisation terms. This morning, National Australia Bank (NAB) posted its third quarter trading update (for the period between April and June 2011). The bank's cash earnings came in at $1.4 billion, which was a touch under expectations. The company indicated that its operating conditions remain challenging. This is in part due to subdued credit growth and delicate consumer confidence levels.

NAB is down 4.64 pct or 96.5 cents to $19.93, ANZ Banking Group (ANZ) is off 4.11 pct or 76 cents to $17.74, Commonwealth Bank of Australia (CBA) is 4.08 pct or $1.86 to $43.77 while Westpac (WBC) is 3.82 pct or 71 cents weaker to $18.13.

Following the end of daylight savings in April this year, major Asian markets will be trading between the hours mentioned below until mid October.

The Hong Kong sharemarket trades in two sessions each day and will now be opening for trade between 11.30am (AEST) and 2pm (AEST) and then between 3.30pm (AEST) and 6pm (AEST) in its second session.

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Out of Japan, the first session will be between 10am (AEST) and 12pm (AEST), while the second session is between 1.30pm (AEST) and 4pm (AEST).

The Singapore exchange will be open for trade between 11am (AEST) and 2.30pm (AEST) for the first session and then between 4pm (AEST) and 7pm (AEST) in its second session.

The major Asian markets are declining for the sixth consecutive day, with South Korea's KOSPI index down a staggering 7.69 pct or 143.71 pts to 1725.74, Japan's Nikkei 225 down 4.43 pct or 403.25 pts to 8694.31, Hong Kong's Hang Seng is 7.38 pct or 1512.94 pts lower to 18977.63 and China's Shanghai Composite index is off a less substantial 2.06 pct or 51.94 pts to 2474.86.

On the economic front today, the Australian Bureau of Statistics (ABS) released its latest housing finance report at 11.30pm (AEST). The change in the number of new home loans granted for owner-occupied homes remained unchanged in June, whereas the market was forecasting a slight improvement.

One of the best performing large cap stocks at lunch is Perseus Mining (PRU), which is up 2.31 pct or 7 cents to $3.10. PRU aims to be a gold producer and operator of gold projects. Its main gold tenements are spread across Africa, including the west of the continent. The company was first listed in 2004 and currently has a market capitalisation on the ASX of $1.32 billion.

So far today, 2.14 billion shares have been traded worth $4.73 billion. 103 shares are up, 1,198 are lower and 195 are currently unchanged. This is substantially higher than the average volume and value traded at lunch on a typical day.

The Australian dollar has dropped below parity against the U.S dollar for the first time since March this year and currently buys US99.7 cents.

Back on March 11, Japan experienced one of its largest earthquakes, a tsunami and nuclear uncertainty. In late May, Japan's Economics Minister Kaoru Yosano said that the estimated rebuilding cost from the March 11 earthquake could reach as much as US$184 billion. This is not including the potential US$100 billion in compensation claims which Tokyo Electric Power (or ultimately the Japanese government) might need to fork out to the thousands of evacuated residents in the region.

(From Steven Daghlian, Commsec Market Analyst)

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