Australian Stock Market Report – Midday 10/18/2012

MIDDAY REPORT
(12.50pm AEDT)

Overnight the US market closed slightly higher and the European markets were also stronger. Better than expected home start numbers, for the month of September, out of the states helped reduce the pain from weaker than expected results from key technology forms IBM and Intel.

After the bell, eBay's share price was hit by a weaker than expected report from the e-commerce giant. eBay's revenue slightly missed the mark, even with a strong lift in mobile phone purchases boosting Paypal overall numbers. American Express also lost ground after the card firm listed a weaker than expected quarterly revenue. Revenue came in at $7.86 billion below expectations even with a lift in card membership and spending.

The Australian share market started off in fine fashion this morning, the All Ordinaries Index (XAO) up 32 points. The gains in base metals and the gold price helped lift the mining stocks and banks were stronger. By lunchtime the All Ordinaries Index (XAO) had built on its strong start with the index up 42 points to 4,594 points. The market was still waiting on the drop of Chinese data; GDP, retail sales, industrial production and fixed asset values, out later today that could impact the market into the close.

The S&P/ASX 200 Materials sector added 2.3% in morning trade. Before the start of trade today Vale´s the world's largest iron ore producers reported a fall of 4.6% in its 3rd quarter iron-ore production, the drop was expected by the market and most analysts were happy with the overall report, even with Vale noting that it has seen a pull-back in demand from China and Europe. BHP Billiton Limited (BHP) yesterday released its quarterly production report, with coking coal and iron ore output beating expectations. Today BHP our largest listed miner added 2.9% to $34.42. Rio Tinto Limited (RIO) also higher adding 3.35% or $57.93 while Australia's third biggest iron ore miner, Fortescue Metals (FMG) lifted by 2.7% to $4.18. Arrium Limited's (ARI) - the old Onesteel, continued to move higher 3.9% in early trade, rivals in the steel space, BlueScope Steel Limited (BSL) rebounded by 3% and Sims Metal Management Limited (SGM) was up 1.7% to $9.94.

The Gold price lifted again overnight and held on in early morning Asian trade, the US$ price now at US$1,751 an ounce. Our largest listed gold producers Newcrest Mining Limited (NCM) released its quarterly production numbers today, the market was not surprised by the result as Newcrest had already given very firm guidance on the numbers a few weeks ago. September quarterly production totalled 460,425 ounces of gold, off 21.6% year on year and copper also lower at 18,598 tonnes. NCM lifted 0.5% to $27.78 and St Barbara Limited (SBM) added 0.6% while Kingsgate Consolidated Limited (KCN) lost ground off another 2.14% to $5.94.

The US$ oil price held steady overnight and is now at US$92 a barrel. S&P/ASX 200 Energy sector added 1.26% helped by strong quarterly production numbers from Woodside Petroleum Limited (WPL) and Santos Limited (STO).Woodside reported a stronger than expected third quarter 2012 production result today, posting 26.5 million barrels of oil equivalent (MMboe) up 32% quarter on quarter (Q/Q). WPL's revenue came in at US$1,828Million and the firm lifted its full year production target to now be between 83-86 MMboe. WPL's share price lifted 3.55%. Santos alos reported a strong result but no real surprises in its numbers. Production at Santos was 13.5 mmboe up 6% Q/Q and revenue was higher helped by a lift in output & gas price, shares up 0.5% to $11.87.

Today the retail sector has rebounded, the S&P/ASX 200 Consumer Staples sector lifted by 0.47% by lunch time with gains in the big name food and beverage retailers. Woolworths Limited (WOW) first quarter sales were released today and they were up 4.3% to $15.2 Billion. Sales at its Big W and home improvement businesses increased over the quarter, but petrol sales were lower. Woolworths has seen a strong gain in online sales up 30%, but the company is still concerned about food deflation. WOW share price lifted slightly to $29.20 and its rival Wesfarmers Limited (WES) gave back 0.5% to $34.89 and Coca-Cola Amatil Limited (CCL) off 0.22%.

Shares in the Ten Network (TEN) fell over 7.5% to $0.30 yesterday after private equity firm Champ terminated the agreement to buy Ten's outdoor advertising business EyeCorp for $145 million. Today Ten Network reported a net loss of $12.9 million for the 12 months to August 31, 2012. The result was heavily impacted by $23.7Million in non-recurring costs (one off costs), from redundancies, impairment charges and writedowns on its investment in OurDeal business. The company posted a loss of says it's talking to Champ about potentially amending the terms of the agreement in a bid to rescue the sale. The network had planned to use sale of Eye Corp to reduce its debt. TEN shares lifted in early trade up 3.23% to $0.32. Fairfax Media Limited (FXJ) also higher up 2.67%.

The financials, the S&P/ASX 200 Financials sector lifted by 0.60%, led by our big 4 banks and the insurance sector today. Bank of Queensland Limited (BOQ) Bank lost more ground today, off 1.36% to $7.25, after confirming its full year results to the market. BOQ told the market back on the 9th of October that it expected the banks second half profit would be weaker than expected, the worst loss in 20 years. Today BOQ confirmed this loss, booking a loss for $17.5million for the full year after its bad and doubtful debts continue to plague the firm. BOQ has a very large exposure to the Northern Australian property market. Bendigo and Adelaide Bank Limited (BEN) up 1.6% and Commonwealth Bank of Australia (CBA) slightly higher, with Westpac Banking Corporation (WBC) up 0.5% to $26.03. Insurance Australia Group Limited (IAG) up 1.34% to $4.54.

Telstra Corporation Limited (TLS) added 0.5% to $4.04. Qantas Airways (QAN) up 2.44%

The Australian dollar (AUD) held steady at US103.79 and 0.7919 euro cents.

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