Australian Stock Market Report – Midday 1/4/2013

Midday Market Report
(1pm AEDT)

After a weak session on overseas market the Australian share market gave back yesterday's gains. At the open of trade the All Ordinaries Index (XAO) lost over 23 points with weakness in small and medium mining stocks and the energy sector. Markets in both China and Japan reopened for trade today will all market in the region now fully operational after the New Year's break.

Overnight global stock market volumes fell back to holiday levels as the excitement over the US budget plans washed out of the market. European shares were mixed on Thursday with profit-taking being tempered by solid US economic data. US market came under renewed pressure after the latest minutes from the Federal Reserve were released. The minutes showed that the US Central Bank, the Federal Reserve, "several" of its members thought it may be appropriate to "slow or stop" the current quantitative easing program (QE4) by end 2013. Although the FOMC appears split about the outlook for further asset purchases, it has retained a degree of flexibility. While the Fed's asset purchase program is being questioned, we, CommSec and CBA) still feel the first Fed Funds rate hike is still a long way off but the market was very cautious about the statements and investors sold down stocks. Technology and telco stocks were hit hard while banking and health care stocks did a little better. Investors in the US, and globally, now turning their focus on the US non-farm payroll numbers that are due out later tonight.

By lunchtime The All Ordinaries Index (XAO) was down 16 points or 0.33% to 4,745.

Yesterday it was all about a lift in demand for small and mid-cap miners in morning trade but today we saw the market move full circle with heavy selling in these stocks and money going into more defensive areas.

Commodities turned lover overnight, in London the base metal markets lost ground. The gold price also weakened in late trade and the US dollar gold price has fallen another US$27 an ounce in electronic trade out of Asia to US$1,648 an ounce. Regis Resources Limited (RRL) off 3.9%, St Barbara Limited (SBM) off 2.23% and Newcrest Mining Limited (NCM) gave back yesterday's gains off 2.8% to $23.05.

By lunch the S&P/ASX 200 Materials index was off 1.13%. Today the heavy weight BHP Billiton Limited (BHP) gave back 0.62% to $37.89 while Rio Tinto (RIO) fell by 1.2% to $68.40. Iluka Resources Limited (ILU) off 4.22% to $9.31. Also in the material sector, construction materials firm Boral Limited (BLD) bucked the trend up 1.9% to $4.22 while Lynas Corporation Limited (LYC) lost nearly2% to $0.62c and OZ Minerals Limited (OZL) gave back just under 0.5%.

Today S&P/ASX 200 Industrial sector especially the mining related service and transport stocks rallied higher yesterday. Today the mining service provider Macmahon Holdings Limited (MAH) confirmed that it had received a non-binding takeover offer, for its construction business, from Indian based Sembawang Group's Australian subsidiary. Macmahon Holdings gained another 3.5% today with Leighton Holdings Limited (LEI) which owns around 24% of MAH saw its share price gaining 1.55%. The MAH takeover news boosted like stocks with UGL Limited (UGL) was up 0.9% and Downer EDI Limited (DOW) 1.6% higher in a negative market.

The big four banks were mixed by lunch. Westpac Banking Group (WBC) up 0.25% to $26.25. Commonwealth Bank of Australia's (CBA) fell from yesterday's record high this morning to $63.05.

Australia's biggest telecommunications company, Telstra (TLS) share price was flat at $4.48. Other standouts: Toll Holdings Limited (TOL) up 2.7% and Carsales.Com Limited (CRZ) up 3%. Carsales helped by today's news that Aussie car sales surpassed 1 million sales again in 2012.

The Aussie dollar fell back over night and in early trade gave back more ground at 1pm AEDT the Aussie dollar is buying US104.52c but still stronger against the Euro at €80.19.

Today's Australian Industry Group/Commonwealth Bank Australian December Performance of Services Index (Australian PSI®) showed a slide in the last month down 3.9 points to 43.2. The Index fell from 49.0 in December 2011. A PSI reading below 50 represent a contraction in activity with the distance from 50 indicative of the strength of the decrease. The services sector declined for 11 months in 2012 and over the past year, the majority of service sub sectors reported only one month of growth. Finance & insurance was the only sub sector to record growth in December (62.8). It was the best performing sub sector of 2012, reporting nine months of growth.

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