Australian Stock Market Report – Midday 10/5/2012

MIDDAY REPORT
(12.30pm AEST)

The Australian share market started off slightly stronger again today and by lunchtime the All Ordinaries Index (XAO) had rallied 30points higher to 4,450 points, as the reversal in the US$ oil price overnight and strength in the retail sector boosted stocks. The XAO set to close higher for the seventh straight day.

On the economic front, more bad news for the construction sector with the September report on Australia's Construction Activity declining for the 28th straight month. The AIG Index fell to 30.9 in September from 32.2 points in August any level below 50 means construction is in decline. The largest falls fell in the residential & commercial construction sectors.

Yesterday the retail sector was held back after official retail spending rose by only 0.2% in August after sliding by 0.8% in July. Annual spending growth fell from 3.5% to 3.2% while non-food retailing rose by 0.1% in August.

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) added 1.9% and its rival Wesfarmers Limited (WES) up 1.3% to $34.71 and Coca-Cola Amatil Limited (CCL) added 1.5%.

Today the S&P/ASX 200 Consumer Discretionary sector started off strong, and by lunch had added 0.3%. Surfwear retailer, Billabong (BBG) had a terrible day yesterday off 18% before going into a trading halt. The fall was on the back of speculation a second private equity firm is thinking about taking its bid off the table (TPG Capital). BBG came back on the market today after saying that TPG was still interested in the possibility of acquiring the firm but BBG shares fell another 0.5% to $1.07. JB Hi-Fi Limited (JBH) up 1.6% to $9.92 and Super Retail Group Limited (SUL) up 1.36% while Breville Group Limited (BRG) fell 2.7%.

The financials led the market higher yesterday but today the sector has already come under pressure. A weaker than expected result from Bank of Queensland Limited (BOQ) pushing the S&P/ASX 200 Financials sector into the red, off 0.05%. Bank of QLD fell over 5% to $7.54, after telling the market it now expects the banks second half profit would be weaker than expected. BOQ expects to book a loss for 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. BOQ said it expects to list a 2nd half profit of $70 to $75Million but this will not offset the $90.6Million 1st half loss posted in February. Bendigo and Adelaide Bank Limited (BEN) off 0.13%. Commonwealth Bank of Australia (CBA) slightly higher to 56.56, with Westpac Banking Corporation (WBC) up 0.33% to $25.65. Insurance Australia Group Limited (IAG) off 1.6% to $4.43.

The S&P/ASX 200 Materials sector lifted by just under 1.5%, as BHP Billiton Limited (BHP) added 0.8% to $33.26. Rio Tinto (RIO) off 1.3% or $54.76 while Australia's third biggest iron ore miner, Fortescue Metals (FMG) lifted by 2.90% to $3.55. Arrium Limited's (ARI) - the old Onesteel, continued to move higher 3.36% in early trade, rivals in the steel space, BlueScope Steel Limited (BSL) rebounded up 4.38%. Sims Metal Management Limited (SGM) up 4.4% to $10.28.

The Gold price lifted again overnight. Our largest listed gold producers Newcrest Mining Limited (NCM) added over 3% to $29.09 and Kingsgate Consolidated Limited (KCN) regained 3.9% to $6.01. Regis Resources Limited (RRL) gave back 2.89% to $5.59.

The US$ oil price has continued its wild ride after the 4% slide only 2 days ago last night the US$ oil price regained all its previous night's losses. S&P/ASX 200 Energy sector added 0.6% after US$ oil price rallied back above US$91.75 a barrel at the close in the US session. The reason for the solid run in the oil price had nothing to do with demand it was all to do with uncertainly over future supply on the news of Turkey´s retaliatory strikes on Syria heightened tensions in the Middle East. Woodside Petroleum Limited (WPL) lifted 0.15% and Santos Limited (STO) increased by 1.8% to $11.72.

Telstra Corporation Limited (TLS) added 0.5% to $3.95. Qantas Airways (QAN) up 1.23%

The Australian dollar (AUD) held steady at US102.68 and 0.78.88 euro cents.

[Kick off your trading day with our newsletter]