Australian Stock Market Report – Afternoon July 18, 2014

The site of a Malaysia Airlines Boeing 777 plane crash is seen near the settlement of Grabovo in the Donetsk region, July 17, 2014. The Malaysian Flight MH-17 was brought down over eastern Ukraine on Thursday, killing all 295 people aboard and sharply raising stakes in a conflict between Kiev and pro-Moscow rebels in which Russia and the West back opposing sides. REUTERS

EVENING REPORT
(5:00PM AEST)

After a trying and emotional night in the US on the back of the crash of Malaysia Airlines flight MH17 and escalated international tensions in the Middle East, Malaysia Airlines is currently down 11% as investors come to grips with the news. Malaysia Airlines is majority owned by the Malaysian government holding company Khazanah Nasional Bhd. who told the market in the early session that MH17 B777-200 had a ´clean maintenance record´. Concerns about the ramifications of the incident sent the VIX the US volatility index up over 30% in US trade.

Before the start of the Australian markets today we were also hit with the news that the Israeli military had launched ground operation in The Gaza Strip. The geopolitical unrest caused the price of gold and oil higher at the open of our trading session today.

As the day worked on, the markets started to calm down as more information over the situation came to light. By the close the All Ordinaries Index (XAO) was up by 0.17 per cent to 5519.1 points.

During the afternoon the losses in the market were washed away and most sectors closed higher. The material sector was held back by the larger iron ore stocks while the gold stocks did well. At the close of the Australian markets the US$ gold price was at US$1,315 off US$2 from its high overnight. Australia's largest gold stock Newcrest Mining (NCM) closed up 3.23 per cent while and the smaller Northern Star (NST) up 1.45 per cent. BHP Billiton (BHP) and Rio Tinto (RIO) ended the day down 0.42 per cent and 0.17 per cent respectively.

The energy sector finished slightly lower while the oil price continued to lift in Asian trade to US$103.71 per barrel. Oil and gas producer Woodside Petroleum (WPL) was up 0.79 per cent, adding to yesterday's gains following a solid quarterly production report. Furthermore, today we saw Santos (STO) release its production and revenue figures for the FY14 second quarter. Santos' production reached 12.8mmboe up 5% (Q/Q) due largely to the early commencement of PNG LNG, whilst Revenue hit $974Million for 2Q14 up 7% due mainly to increased sales volumes (up 9% Q/Q) offsetting lower average oil prices (down 5% Q/Q). The guidance for STO remains unchanged at 52-57mmboe for the final quarter. Today STO closed down 0.42 per cent.

All of the four major banks have closed higher, with Westpac (WBC) maintaining its momentum to close at 0.77 per cent.

Transport firm, Asciano (AIO) closed just under 4% higher today after AIO Management said ´´it has been and continues to be in talks to sell
part, or parts, of its ports and logistics business" but at present they have not agreed to anything. Asciano's rival Toll Holdings Limited (TOL) also higher up 1.3%.

Unlike the airlines in other parts of the world, Australia´s airline stocks have surprisingly remained steady despite the news, with Qantas Airways (QAN) up 0.81 per cent to $1.25 while Virgin Australia Holdings (VAH) also closing up 1.23% to $0.41.

At the close of market we see a weaker Australian dollar buying US93.69 cents, up0.19 per cent from yesterday in line with the disruptive news surrounding Malaysian flight MH17.