Australian Stock Market Report - Midday 2/14/2012

LUNCHTIME REPORT
(12pm AEDT)

It has been a muted start to the local trading day, following ratings downgrades of several European nations by Moody's. The local share market was tipped to receive a boost, after US and European markets rose overnight in response to the solid vote in the Greek parliament to approve austerity measures. However, after the bell on Wall Street, Moody's downgraded the credit outlooks on Triple A ratings of France, the UK and Austria to negative; and cut the ratings of Italy, Portugal, Spain, Slovenia, Slovakia and Malta. In early trade, the All Ordinaries Index (XAO) is lower by 10.8pts or 0.2pct to 4348.6.

The financial sector is weaker by0.3pct with the National Australia Bank (NAB) the worst out of the big four, down 0.5pct to $23.14.

Mining stocks are also under pressure, in response to weaker base metals movements in London overnight. Shares in BHP Billiton (BHP) are lower by 0.6pct to $36.46 while Rio Tinto (RIO) is down 0.5pct to $70.08. The two mining giants have today told the market they are lifting their current investment in the world's largest Copper mine Escondida in Chile. BHP is the majority stakeholder in the mine with a 57.5pct interest and will put an extra US$2.2 billion into the project. Rio Tinto holds a 30pct stake and will be adding US$1.2 billion. The new funds will be to upgrade its current concentrator at the mine. This will enable the companies to extract higher grades of ore at a deeper level and a new concentration and refining plant on site by 2014. BHP and RIO also announced a 25pct upgrade to the ore reserves at Escondida.

Building fixtures supplier GWA Group (GWA) has reported a 60pct fall in first half profit to $13.3 million, due to lower building and renovation activity in the half. GWA is in the middle of a company restructure in which it is selling off non-core business units and assets. The company said it suffered a $7.5 million after-tax loss due to restructuring expenses and a $6.7 million loss to discontinued operations. GWA announced a dividend for shareholders of $0.095 cents a share in-line with its prior corresponding period.

Economic data released today shows business conditions improved a little in January, following rate cuts in November and December. Business conditions rose two index points to plus two points in January. Business confidence rose one point to plus four points.

The Australian dollar is buying US107.16c, £0.6813 and €81.42c.

Juliette Saly, CommSec Market Analyst

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