Australian Stock Market Report - Midday 12/22/2011

MIDDAY REPORT (1pm AEDT)

The local share market opened lower this morning after a negative sessions on overseas markets. European markets were held back by uncertainty over the European Central Banks (ECB's) new bond program and the U.S. markets hit by large downward revisions to existing home sales.

At lunchtime in the East, the All Ordinaries Index (XAO) was off by 34.7 points to 4155.5.

Once again the focus has been on the retailers, The S&P/ASX 200 Consumer Discretionary was once again under pressure off 1.6 pct. Kathmandu Holdings Limited (KMD) announced a drop in earnings because of weaker than expected pre Christmas sales, with the last 5 weeks of sales coming in below those registered in 2010. KMD shares off 24.5pct to $1.25.

Surf wear maker Billabong International Limited (BBG) lost another 4.8pct to $1.85, after hitting an all time low of $1.70 early in the week. Entertainment products retailer JB Hi-Fi (JBH) down nearly 5pt to $11.56. Shares in electronic retailer Harvey Norman (HVN) also down 2.6 pct.

The Industrial index is slightly lower with transports stocks the main drag on the sector. QR National Limited (QRN) down nearly 2pct to $3.44 and Qantas Airways Limited (QAN) off 1.6pct, Sydney Airport (SYD) down 2.8pct and Downer EDI Limited (DOW) off 0.6pct to $3.18.

Energy stocks also lower but petroleum companies are doing a lot better than coal companies today thanks to the pickup in the oil prices overnight. Woodside Petroleum Limited (WPL) up 0.75pct to $30.95 and Santos limited (STO) at $12.34. Shares in Gloucester Coal are still in a trading halt, ahead of an announcement about a potential takeover by Chinese coal producer Yanzhou Coal Mining. The deal is said to be worth around $2 billion. Gloucester shares last traded at $7.03.

Base metal prices were little changed on the London Metal Exchange overnight. The S&P/ASX 200 Materials Index off 0.5pct. Market leader BHP Billiton (BHP) and Diversified mining giant, RIO Tinto (RIO) both off around 1pct. Fortescue Metals Group Limited (FMG) down again today as investors still weighing up the concerns over the increase in the budget for its major rail contract in WA. Fortescue shares off 1.1pct to $4.45. The country's largest gold producer, Newcrest Mining (NCM) is off another 2pct to $31.04.

Elsewhere, Telstra Corporation Limited (TLS) flat, while media and service sector stocks also in the red.

The Aussie dollar stronger against the major currencies, it's buying US100.6c and €77.14c.

Craig James, CommSec Chief Economist

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