Australian Stock Market Report – Afternoon 7/18/2012

AFTERNOON REPORT
(4.30pm AEST)

The local share market pulled back today following three consecutive sessions of gains, as investors elected to be cautious despite gains on Wall Street overnight. Weakness in mining stocks dragged on sentiment, as index leader BHP Billiton (BHP) fell close to the $30 per share level for the first time in more than three years. The All Ordinaries Index (XAO) finished down 18.9pts or 0.5pct to 4156.4, after hitting an intra-day low of 4154pts.

US share markets rose modestly overnight on positive earnings results and despite some disappointment that US Federal Reserve Chairman Ben Bernanke failed to mention a timeline for further economic stimulus. Shares in Coca-Cola rose 1.6pct after better than expected earnings results. Coca-Cola Amatil (CCL), which is the principal Coca-Cola license in Australia, rose 0.2pct to $13.44 on our market.

Financial stocks looked strong, with the Commonwealth Bank (CBA) hitting its highest level since February 2011, up 0.6pct to $55.25. Australia's largest bank by market value today announced a pay freeze for all staff on a base wage of $150,000 and above. A CBA spokeswoman said "We are determined to avoid making short term decisions, including setting targets for a reduction in staff numbers.....this does not mean that we take expense management less seriously." Elsewhere, shares in the National Australia Bank (NAB) rose 0.3pct to $23.77 while Macquarie Group (MQG) fell 2.4pct to $24.74.

Mining stocks were the losers of the day, and the reason the market closed in the red. BHP Billiton (BHP) reported its June quarter production report today, with strong performance in its iron ore performance, in line with competitors Rio Tinto (RIO) and Fortescue Metals Group (FMG) which came out with their reports yesterday. BHP Billiton also flagged a five percent rise in 2013 iron ore production following the bumper result for the June quarter. However the production numbers had already been widely factored into the market, and investors sold out of mining companies on offshore concerns such as weaker commodity prices, as well as rising costs outlined by the mining giants in their reports. BHP shares today fell near $30 a share, their lowest level since March 2009. BHP closed down 2pct or $0.61 to $30.18. Shares in Rio Tinto fell 3.1pct to $52.78 while FMG was down 3.5pct to $4.38.

Elsewhere today, port and rail operator Asciano Group (AIO) announced expansion plans at its Sydney Port Botany operations, including using more automation. The expansion will cost around $348 million and boost annual capacity at the site to 1.6 million 20-foot equivalent units. Asciano today also announced 270 job cuts. Its share price rose for a third consecutive session, up 0.7pct to $4.37.

One of the biggest winners on the market was Gerard Lighting Group (GLG), which rose 26.7pct or $0.215 to $1.02 on a takeover bid. The company, whose products light up Adelaide Airport and also provided lighting for Melbourne's Commonwealth Games Village, has received a $186 million offer from private equity firm Champ. Gerard Lighting said Champ´s $1.05-a-share cash offer has the backing of all directors including members of the founding Gerard family which hold 52pct of the company´s stock. The bid is a 40pct premium to GLG´s closing share price $0.75 on Friday, before the company was placed in a trading halt on Monday.

No market moving economic data was released today however the Australian dollar continued to gain ground. At 4.30pm AEST the Aussie was worth US103.09c, £0.6591 and €83.92c.

On the market overall, a total of 1.38 billion shares were traded, worth $3.64 billion. 355 were up, 519 were down and 349 were unchanged.

Later tonight, US Federal Reserve Chairman Ben Bernanke delivers a semi-annual report to the House Financial Services Committee. The Federal Reserve's Beige Book is also released. Signs of weakness in the 12 key districts would add to expectations of more easing from the Federal Reserve.

The Bank of England releases minutes from its July board meeting. The minutes will provide insight into the discussions and voting pattern for the BoE's decision to raise its asset purchase target by £50bn to £375bn in July. UK labour market data is also due.

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