Australian Stock Market Report

MIDDAY REPORT (12.30pm AEDT)

Last Friday, the Australian Stock market closed early for the festive break at 2pm AEDT. The All Ordinaries Index (XAO) added nearly 50points. Today after a four day Christmas break the market reopened lower, at lunch The All Ordinaries Index (XAO) off 36pts, trading volumes have been light and eight out of the ten index sectors are trading lower.

This morning the market was hit by the negative close on Asian markets yesterday and the weak close on U.S. markets overnight. The London market the FTSE was closed for the Boxing Day break and will re-open tonight as well as the London Metals Exchange (LME) and Canada's main exchange the Toronto Composite. The LME is the main market for the trading of global base metals and without copper and aluminium trading overnight our miners are directionless today.

S&P/ASX 200 Energy Index off 0.6pct, even the higher US dollar oil price, up for the 6th straight session, adding another US$1.60 a barrel overnight to close above US$101 a barrel, was not able to push the index across the line. The U.S. oil price moved higher on the news of improving U.S. consumer confidence is expected to boost energy demand. Woodside Petroleum Limited (WPL) off 0.4pct to $31.40 and Santos Limited (STO) off 0.3pct to $12.32.

Gloucester Coal (GCL) shares have come off near 1pct in early trade. After Gloucester closing rose 22pct higher on Friday as details of the much anticipated takeover of the company were released to the market. Market analysts and share holders seemed very impressed by the deal on Friday. If the detail goes thru in its current form the joint group and newly formed company the Yancoal Australia will become the largest stand-alone coal miner on the Australian stock exchange. Gloucester Coal shareholders will receive shares in the new entity, along with $3.20 in cash per share if they accept the offer. Gloucester's largest shareholder Noble Group Limited has agreed to the $2.2Billion reverse takeover offer.

S&P/ASX 200 Materials Index off 1.5pct. BHP Billiton Limited (BHP) shares off 1.4pct to $34.66. News out today that BHP Billiton has a new agreement covering five exploration tenements near BHP's Olympic Dam mine with Archer Exploration Limited (AXE). The agreement will cost $3 million. These tenements, or plots, hold many undrilled potential exploration areas for uranium, AXE shares are flat. Rio Tinto Limited (RIO) share price off 1.3pct to $60.96 and Fortescue Metals Group Ltd (FMG) off 2.3pct to $4.39.

ARC Exploration Limited (ARX) shares fell 30pct at the start of trade after news the company will halt exploration after recent violent demonstrations by locals in Indonesia against its activities in the area. Three people were killed and ten injured in the conflict shares are still lower off around 20pct to $0.08.

Newcrest Mining Limited (NCM), Australia's largest listed gold miner, off 2.2pct to $30.75. St Barbara Limited (SBM) also hit by the fall in gold off another US$10 an ounce overnight.

The financial sector lost ground off 1.2pct. The insurers under pressure as investor look deeper into the expected cost of claims from the storm damage in Melbourne over the Christmas long weekend. IAG (IAG) shares drop 1.6pct to $3.02 and Suncorp Group Limited (SUN) also down 1.6pct to $8.33. As industry experts expect up to 10,000 claims will flow through after the storms.

Elsewhere, Telstra Corporation Limited (TLS) up 1.2pct to after confirmation that the Foreign Investment Review board (FIRB) has approved the pay television provider Foxtel´s $2.5billion takeover for regional pay TV provider Austar United Communications (AUN) up 0.5pct on the news to $1.20. News Corporation Limited (NWS) shares off slightly to $17.85.

The Australian dollar ended the day's trade at US101.63c and €77.76c.

Craig James, CommSec Chief Economist

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