Australian Stock Market Report - Midday 12/06/2011

MIDDAY REPORT (12pm AEDT)

Overnight US market closed higher after a mid-session glitch that saw the index slide over 50points on the news that the Financial Times, out of London, had reported the rating agency Standard's & Poor's was likely to cut 6 key European nations AAA credit ratings. After the initial shock the market turned higher. Dow Jones Index and NASDAQ both ended stronger.

The Australian market opened slightly lower as cautious trading reigned after confirmation Standard & Poor's said it may cut credit ratings on 14 members of the euro zone because of their debt dramas. Investors also still waiting on the outcome from the Reserve Bank of Australia's (RBA) interest rates decision later today (2.30pm AEDT). The interest rate markets have priced in an 85pct chance of a cut today and if not the market expects that rates will be cut in February 2012.

The local share market is lower at lunchtime. The All Ordinaries Index (XAO) off 26pts or 0.6pct at 4,352 points.

Financial stocks mainly lower, with shares in the National Australia Bank (NAB) 0.3pct to $24.58, ANZ Banking Group and Commonwealth Bank also lower. While Macquarie Group (MQG) slightly higher up 0.12pct to $24.63.

Mining and energy players are also negative. Gold producer Newcrest Mining Limited (NCM) down 2.7pct to $34.42, after a U$25 an ounce slide in the gold prices over night. Renewed concerns about future iron ore price weakness holding back or larger miners this morning. BHP Billiton Limited (BHP) off 0.8pct to $36.96 And Rio Tinto Limited (RIO) dropped nearly 1 percent to $66.38.

Kerry Stokes today announced he had won in his $192million challenge to privatise the equipment rental group National Hire Group (NHR), prompting many in the markets to suggest this is part of Stokes' plan to merge the company and list it and Coates Hire as a joint company. NHR shares up over 11 percent to $3.73.

The retail sector also under pressure, ahead of today's RBA interest rate announcement, with food and drink retailers Wesfarmers (WES) and Woolworths (WOW) lower and department store owner Myers Limited (MYR), is off 1.5% to $2.57.

The Australian dollar is worth US102.37c and €76.58c.

Craig James, Commsec Chief Economist

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