Australian Stock Market Report – Midday 12/9/13

Mid Session Report
(12:30 AEDT)

Local trade on Monday was defined by continued weakness in the face of solid gains for US stocks on Friday. US markets were able to embrace the better than expected employment data (unemployment at a 5 year low with job creation beating expectations of 200k jobs added in November).

At lunchtime on Monday the index was making new lows. Significantly these levels were challenging the lows seen on Friday and in the process painting a continuation of the weak technical picture that has been in place for several weeks now.

Financial stocks were noted underperformers. Leading the way for the group was QBE. The insurer expects to post a $250 million loss this year due to weakness in its North American business. The news was driven by $600 million in goodwill write downs stemming from the North American business due increased claims as a result of weaker-than-expected US crop yields and prices. QBE expects its insurance profit margin to fall from eight per cent to six per cent. Forecasts had centred on the group to record a $US1.07 billion profit for this year having posted a $US761 million profit last year. The shares were down almost 20% at lunchtime.

Energy Resources of Australia (ERA) shares are down more than 11 per cent. The group is assessing the impact of a spill at the Ranger mine in the N.T on full year 2014 production guidance. ERA is yet to offer a time frame on how long the mine will be closed or the nature and extent of the repair works required. Production guidance at the mine for 2013 remains at 2,800 to 3,200 tonnes. A recently commissioned water processing machine is expected to prolong the mine´s future beyond an originally planned 2021 closure. In July ERA reported a $53.5 million half year loss.

Metcash (MTS) has announced that it will be separating its food and convenience operations in response to a strategic review of its operations. The group expects the split will assist the turnaround of the supermarkets business and allow a closer focus on growth opportunities in its convenience business. MTS shares were up almost 3% at lunchtime.

According to the ANZ´s monthly jobs survey job ads fell in the last month, although at a slower rate. Job ads fell 0.8 per cent last month, after decreasing by 0.1 per cent in October.

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