Australian Stock Market Report

MIDDAY REPORT (12.45pm AEDT)

Yesterday, The Australian share market managed to improve for the second consecutive day with the All Ordinaries index (XAO) up 2.2 pct or 90.6 pts to 4245.8. But, overnight bank debt concerns in Europe, weak industrial metal prices and low trading in the U.S. held markets back. Causing the Australian markets to open lower, down 30 points.

European shares eased from five-month highs on Wednesday in response to a weak capital raising by Italian lender UniCredit. The concern is that this will could just be the start of the run of many European banks looking to raise fresh capital to keep their businesses afloat.

At lunch, The All Ordinaries Index (XAO) was off 45 points or 1.07 pct to 4,194 points. The trading volumes have increase from last week's lows but still nowhere near normal levels. All sectors have lost ground with the biggest falls being listed in the energy sector even with oil hitting a 8month high overnight with coal stocks the best performing sub sector so far today.

The S&P/ASX 200 Materials index gave back half of yesterday's gains off 1.6pct. Base metal prices (industrial metals) on the London Metals Exchange (LME) closed lower overnight with copper dropping 3 pct. RIO Tinto (RIO) share prices fell 0.95 pct or $0.60 to$62.55 while BHP Billiton (BHP) off 1.51 pct or $0.55 to 35.67. Fortescue Metals Group Ltd (FMG) off 2.6 pct while OZ Minerals Limited (OZL) shares off 2.28 pct to $10.37.

The gold price rose on lingering investor concerns about the Euro debt crisis up US$12.20 or 0.8 pct to US$1,612.70 an ounce. Our largest listed gold miner Newcrest Mining Limited (NCM) shares lost ground off 2.38 pct or $0.74 to $30.29. St Barbara Limited (SBM) flat at $2.07 while PanAust Limited (PNA) off 1.18 pct to $3.35.

World crude oil prices rose modestly on Wednesday in response to stronger US economic data and on-going tensions between the US and Iran. US NYMEX crude oil rose by US$0.26 or 0.3 pct to an 8-month high of US$103.22 a barrel. The S&P/ASX 200 Energy Index fell 1.6 pct, Woodside Petroleum Limited (WPL) off 0.83 pct to $31.14 and Santos Limited (STO) down 2.45 pct or $0.31 to $12.34.

New Hope Corporation Limited (NHC) was one of the few stocks in the energy sector to have moved higher in morning trade up 0.36 pct to $5.59 and Caltex Australia Limited (CTX) added $0.01 to $12.13.

The S&P/ASX 200 Industrial Sector under pressure, with transport stocks lower after oil prices increased overnight and profit taking hit the markets, Brambles Limited (BXB) off 1.63 pct to $7.24. Leighton Holdings Limited (LEI) off 1.93 pct to $19.77. Qantas Airways Limited (QAN) off 1.29 pct to $1.52. QR National Limited (QRN) off 0.56 pct to $3.54.

The S&P/ASX 200 Consumer Discretionary sector (discretionary retailers) added over 2 pct yesterday but today has already given back 0.86 pct. Department store owner Myer (MYR) off 1.13 pct to $1.96 while rival David Jones (DJS) up 1.2 pct to $2.43. Harvey Norman (HVN) off 0.08 pct to $1.86. While online accommodation, activity and flight booking services company, Wotif.com Holdings Limited (WTF) added another 1 pct to $3.71.

The S&P/ASX 200 Financials index under pressure off 0.91 pct, the four major banks leading the falls. Westpac (WBC) off 0.78 pct or 34 cents to $20.33. National Australia Bank (NAB) off 1.78 pct to $23.77 and Commonwealth Bank of Australia (CBA) off $0.45 to $49.54. While insurers QBE Insurance Group Limited (QBE) down $0.05 to $13.27 with Suncorp Group Limited (SUN) bucking the trend added 0.6 pct to $8.73.
Yesterday Telstra Corporation Limited (TLS) shares hit a 2 year high but today TLS off 0.88 pct to $3.38.

In economic news - The Australian services sector remained stuck in negative territory in December with household discretionary spending remaining soft, according to the latest Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (PSI). The seasonally adjusted PSI was 1.3 points higher in December at 49.0, but it remained below the key 50 point level, indicating a contraction in activity.

The Australian dollar continued to move higher, 1 Aussie dollar will now buy you US103.24 cents and €80.01cents. The Aussie Dollar hit an all - time high against the Euro of €80.14 cents just after 7am (ADST) today.

Juliana Roadley, CommSec Market Analyst

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