Australian Stock Market Report

MIDDAY REPORT
(12.30pm AEDT)

It was great to see the Australian share market bouncing back from yesterday's losses at the open of trade today. Yesterday the market posted its worst day of 2012.Today, with the All Ordinaries Index (XAO) slumping by 1.6 pct or 70.2 points to 4257.2.

This morning the All Ord's opened 40 points higher and by lunch the All Ordinaries Index (XAO) had given back most of its early gains as investors because a bit more cautious head of trading tonight in the U.S. ahead of the Presidents Day long weekend in the States. The index now only up 16 points or 0.4 pct to 4,139.

Airline stocks are in the spotlight again today with the news over night that privately owned Air Australia has been placed into voluntary administration leading to the cancelation on all flights. Qantas (QAN) CEO Alan Joyce announced that Qantas would help to get stranded holiday makers home and would match the Air Australia's ticketed price on any available flights. Qantas released its half year result yesterday, its numbers beat the street and the airline has said that around 500 jobs will be impacted/cut as part of a restructure. QAN shares rose over 6 pct yesterday and today in early trade Qantas off 1.8 pct to $1.81. Qantas' rival in the skies Virgin Australia Holdings Limited (VAH) shares are also lower off 1.4 pct while Regional Express Holdings Limited (REX) up 1.5pct to $1.045 cents.

The retail sector in focus today after Wesfarmers Limited (WES) result yesterday and today's half year numbers and capital restructure information from Pacific Brands Limited (PBG) and Struggling surfwear retailer, Billabong (BBG). Pacific Brands reported net loss after tax of $362.4 million for the six months till the end of December 2011. Pacific Brands result was hurt by weak sales, a write-down of the goodwill in its Underwear business of $388.7 million, and restructuring costs of $13.4 million. Pac Brands shares started off well but have now fallen in the red down 1.52 pct to $0.65.

Yesterday, Wesfarmers posted a net profit for the six months to the end of December 2011 of $1.18 billion yesterday, helped by its supermarket division and home improvement arm. Today, WES shares have rallied 0.89pct to $29.85. Wesfarmers rival in the food and liquor industry Woolworths Limited (WOW) shares also higher up 0.77 pct to $24.97, while department store owners Myer Holdings Limited and David Jones Limited also putting runs on the board, both up over 1.2 pct.

Billabong shares rallied from the open of trade hitting $2.93 up over 50 pct, the highest price since December the 19th 2011, the day the company shares fell 44 pct when it posted a profit warning due to lacklustre Christmas sales. Today, Billabong released its half year result to the end of December 2011 the result was weaker than the market had expected but the rumours of a takeover bid from the U.S. based private equity firm TPG were confirmed. Billabong management have knocked back the offer of $3.00 a share (totalling $766 million). Billabong management said the "takeover offer from TPG was never certain to go ahead as it was subject to due diligence, finance and it not selling down its ownership in any of its brands." Billabong told the market today of its plans to raise US$285 million by selling off 48 pct of its Nixon sports watch brand to improve the debt position. The retailer BBG shares are now at $2.65 up 48.04 pct.

Base metal prices moved slightly lower overnight on the London Metals Exchange and the price of gold hardly moved in quiet trading before closing at US$1,728.40 an ounce. The world's largest miner, BHP Billiton (BHP) up 0.5 pct while RIO Tinto Limited (RIO) down 0.06 pct to $67.21 and Fortescue Metals Group (FMG) adding another 0.5 pct in early trade.

The oil price US$0.51c or 0.5pct to US$102.31 a barrel, energy stocks higher with the S&P/ASX 200 Energy Index up 0.6 pct by lunch. The energy sector was hampered by a weaker than expected result from oil and gas exploration and production company Santo's (STO) Full year result. Santo's full-year net profit for the 2011 calendar year rose 51 pct to $753 million and underlying Net Profit after Tax (NPAT) of $453 million below market consensus of $497million by around 9 pct. Santos production down 5 pct and sales volumes off 4 % while the prices for the energy products it produces lifted over the year with oil up 32 pct and gas up 9 pct helping sales revenues increase by 14 pct to $2,530 million. STO shares off 0.55 pct to $13.48. Woodside Petroleum Limited shares up 0.5pc to $35.07.

The S&P/ASX 200 Financials Index rallied higher this morning, by lunch time the index had added 0.35 pct. Over the last 2 week's we've seen trading updates or half year numbers from all our leading banks and today it was ANZ Banking Group (ANZ) turn. ANZ reported cash earnings for the three months till the end of December 2011 of $1.48 million, and a $1.7 billion first-quarter profit , the company said the current environment for banking internationally had become significantly more challenging . ANZ shares up 1.5 pct to $21.54.Commonwealth Bank Limited (CBA) up 0.14pct to $49.91, National Australia Bank (NAB) added 0.6 pct to $22.77 and Westpac Banking Corporation (WBC) off another 0.3 pct.

Wealth manager, AMP Limited (AMP) posted its full year result yesterday and its shares fell over 2 pct after the numbers came in slightly below what the market was expecting, today AMP shares are off another 0.8 pct in early trade.

The Australian dollar is buying US107.87c, £0.6816 and €82.12c.

Julian Roadley, CommSec Market Analyst

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