Australian Stock Market Report - Afternoon 12/06/2011

AFTERNOON REPORT (4.30pm AEDT)

After six sessions of gains, the local share market ran out of puff today. European debt woes were again the focal point for investors, and a key reason the Reserve Bank moved to cut interest rates for the second month in a row. The RBA cited that "the sovereign credit and banking problems in Europe, to which European governments are still seeking to craft a full response, are likely to weigh on economic activity there over the period ahead," as a reason to move the official cash rate lower by 25 basis points to 4.25pct.

The local market extended its opening losses after ratings agency Standard and Poors warned Germany, France and 13 other Eurozone nations are facing possible credit downgrades. The All Ordinaries Index (XAO) fell 1.4pct today.

Resource stocks were among the biggest losers, with gold miner Newcrest Mining (NCM) falling 4pct to $33.99. BHP Billiton (BHP) dropped 1.5pct to $36.71 and Rio Tinto (RIO) was down 2.2pct to $65.55.

Australia's big four banks said rate setting were under review after the Central Bank moved to cut interest rates. The Bank of Queensland (BOQ) was the first to pass on the rate cut to its customers and ended the day's session up slightly at $7.94. Shares in the National Australia Bank (NAB) were the worst out of the big four, falling 1.5pct to $24.28.

Some retail stocks received a boost on the rate cut, with David Jones (DJS) up 0.7pct to $2.90.

National Hire Group (NHR) shot up 11pct to $3.73 after Kerry Stokes won his $192 million battle to privatise the equipment rental group.

Of today's interest rate cut, CommSec Chief Economist Craig James said "Today's rate cut provides opportunities for businesses, consumers and home buyers. Over the past year most people have focussed on the risks and as a result spending, investment and hiring have proved sub-standard. Now is the time for Australians to become confident again."

The Australian dollar ended the day's session weaker against the greenback and at 4.30pm AEDT was buying US101.72c.

On the market overall, a total of 1.69 billion shares were traded, worth $4.13 billion. 344 were up, 620 were down and 388 were unchanged.

At 4.30pm AEDT on the ASX24, the futures contract was at 4267, down 51pts.

Ahead tonight, weekly retail sales are released in the US.

Juliette Saly, Commsec Market Analyst

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