AFTERNOON REPORT
(4.30pm AEST)

Local stocks tracked sideways today, with losses in the energy and consumer discretionary sectors holding the overall market back. The All Ordinaries Index (XAO) fell 2.8pts to 4539 while the S&P/ASX 200 Index (XJO) eased by 1.5pts to 4472.

Merger and acquisition activity was the order of the day. Before market open, two takeover bids were announced - one in the energy sector and another in the materials sector.

Energy giant Santos (STO) announced plans to acquire the remaining 80pct of Eastern Star Gas (ESG) that it doesn't already own, in a deal which will make Santos the biggest owner of gas fields in NSW. The deal values ESG at $924 million and will see ESG shareholders receive 0.6803 STO shares for every ESG share they own. Coal seam gas reserves acquired by Santos could be sold to domestic power generators or piped north to support an expansion of the company´s planned US$16 billion gas export joint venture at Gladstone in Queensland. Coal seam gas, a natural gas trapped in coal seams hundreds of metres below the Earth´s surface, is growing in popularity as developed countries attempt to reduce carbon emissions blamed for global warming. The deal was unanimously recommended by ESG's board. STO shares fell 3.7pct to $12.74 while ESG rose 41.2pct to $0.84. Bow Energy (BOW), which also focuses on the exploration of coal seam gas, rose 11.7pct to $1.05.

Elsewhere, Australian based iron ore miner Sundance Resources (SDL) told shareholders not to react to a takeover offer from China's Hanlong Mining. Hanlong owns 18.6pct of SDL and is offering 50c per share for the company, a 25pct premium to Friday's closing price of 40c per share. The deal values SDL at $1.44 billion. SDL shares rose 22.5pct to $0.49.

Mixed base metals prices in London on Friday night contributed to a mixed finish from our two big miners. BHP Billiton (BHP) lost 0.1pct to $42.85 while Rio Tinto (RIO) closed higher by 0.3pct to $81.60.

Financial stocks overcame a sluggish start to finish mixed. Westpac (WBC) added 0.7pct to $20.73 while the National Australia Bank (NAB) gained 0.5pct to $23.51. However Macquarie Group (MQG) closed down 1.3pct to $28.62.

Telstra (TLS) shares were well supported, up 0.7pct to $3.01.

NewsCorp (NWS) shares remained under pressure following the arrest of News International Chief Rebekah Brooks over the weekend in the wake of the phone hacking scandal. Ms Brooks was released on bail early this morning. NWS shares dropped 4.1pct today to $14.16 and have lost 16pct since July 8th.

Retail stocks also dragged, with Myer (MYR) down 1.7pct to $2.39 and JB Hi-FI (JBH) off 2pct to $15.10.

In economic data today, a new index on the sale of luxury cars highlighted the relative gloom about consumer spending. The CommSec Luxury Car index fell by 5pct in 2010/11, compared with sales of all passenger cars which fell by 2.7pct and total vehicle sales which were down 1.2pct.

In addition the simple (month on month) annual growth rate of luxury car sales continued to slide after peaking late last year. In fact the CommSec index of luxury passenger car sales hit a 24-month high in September 2010 before easing over the past nine months - in line with the slowdown in the broader economy.

New car sales rose by 1.3pct in seasonally adjusted terms in July, after sliding by 12.1pct in the prior two months.

The national average Australian price of unleaded petrol rose by 1.8 cents per litre to 140.7 cents a litre in the week to July 17. Since the bottoming out on July 6, the terminal gate price has risen by 4.6 cents a litre and as such CommSec expects pump prices to lift by a further 3-5 cents a litre over the next two weeks.

The Australian dollar ended the day's trade at US105.96c, £0.6581 and €75.39c.

On the market overall, a total of 2.1 billion shares were traded, worth $3.84 billion. 509 were up, 572 were down and 366 were down.

At 4.15pm AEST on the ASX24, the futures contract was at 4442, up 1pt.

Japan's share market was closed today for Marine Day. Markets around the Asian region finished flat, with New Zealand's Stock Exchange closing down 0.6pct and the Philippines Composite adding about half of one percent.

Ahead tonight, a number of companies listed on the S&P 500 report earnings including Hallburton, Wynn Resorts and toy maker Hasbro. After the closing bell, IBM will report its quarterly results.

(From Juliette Saly, CommSec Market Analyst)