Australian Stock Market Report

LUNCHTIME REPORT
(12.20pm AEDT)

Yesterday the Australian share market followed global markets higher, closing at a seven month high. So far today the market has been hit by falls in mining and energy stocks, the All Ordinaries Index (XAO) off 0.27 pct or 11 points to 4363.9. Today is options expiry for ASX listed companies so the volumes this morning and opening prices were heavily impacted by this once a month event.

The news that most of America's largest banks survived the last round of stress testing from the U.S. Federal Reserve this helped U.S shares reach 2007 highs yesterday but profit taking and a strong US dollar saw investors closing out positions.

The UK market lost ground in the last half hour of trade on the news that Fitch, the ratings agency, had joined Moody´s in putting the UK´s top AAA credit rating on ´´negative outlook´´. While Fitch lifted Greece´s credit rating to B- from ´´restricted default´´ and Moody's cut its rating on Cyprus to junk because of its current exposure to the Greek banking sector.

Overnight commodity prices were hit as investors moved back into the US dollar out of Treasuries, especially long dated US bonds, and precious metals. The gold prices lost another US$50 an ounce or 3pct and Silver down 4pct. Australia's largest listed gold miner, Newcrest Mining Limited (NCM) came off 1.7pct yesterday in a rallying market and so far today is off by 3.1 pct or $0.97 to $30.33 and smaller gold players also lower, with St Barbara Limited (SBM) off 3.8 % and Kingsgate Consolidated Limited (KCN) off 3.7 pct and Alacer Gold Corporation (AQG) off over 5pct.
The S&P/ASX 200 Materials Index is off 1.5 pct. BHP Billiton (BHP) lost ground in London trade overnight and continued the slide here at home today, rumours are circulating in the market that BHP is preparing to announce the sale of its Ekati diamond mine in Northern Canada. Bloomberg News reported overnight that Harry Winston Diamond Corporation (HWD.N) and private equity firm KKR & Company (KKR.N) could be interested. BHP Billiton shares off 1.57 pct to $35.05 while Rio Tinto (RIO) off 1 pct to $64.62.
Fortescue Metals Group (FMG) is currently bucking the negative trend after announcing that the company plans to double is current bond offer to US$2 billion so it will be able to cover the cost of its large mine expansion plans. Fortescue plans to lift is iron ore output to 155 million tonnes by the end of June 2013, up 33%, and this will help speed up the process. FMG shares up 1.2% or $7 to $5.90.

S&P/ASX 200 Industrial index is doing a bit better than other areas of the market today, as commodity and energy prices fall it helps reduce cost for operators in this sector. The announcement from Fortescue mining has also boosted the share prices of mining equipment and mine operating companies that already have deals with Fortescue on expectations that some of the new cash and projects might flow their way. Downer EDI Limited (DOW) up 0.76 pct to $3.99 and NRW Holdings Limited (NWH) up 1 pct. Leighton Holdings Limited (LEI) also today told the market that its unit John Holland JV contract worth $340 million "Ichthys" onshore LNG facilities site development. LEI shares up 2.2 pct to $24.14.

The retail sector in focus today after Department store retailer Myer Holdings (MYR) reported its results for the 26 weeks to 28th January 2012. The result was slightly below market expectations with Net Profit after Tax (NPAT) of $88million, off 17.5%, and sales down 3 pct. Myers shares started off well but in the last half hour have now moved into the red and are currently off 2.1 pct to $2.32. Myer rival in the discretionary retail space David Jones Limited (DJS) shares are up 0.5 pct to $2.76 and shares of shopping mall operator Westfield Group (WDC) also up 0.5% to $8.83.

S&P/ASX 200 Financials Index is higher lead by the big 4 banks and Australia's largest listed insurer, QBE Insurance (QBE) up by 1 pct to $13.01 and Commonwealth Bank of Australia (CBA) up 0.68 pct or 33 cents to $49.13, ANZ Banking Group (ANZ) up 0.3 pct to $22.37, and National Australia Bank (NAB) only slightly higher.

Australia's largest forestry company, Gunns (GNS) remained in a trading halt for a fourth straight day ahead of a company announcement, last traded at $0.16 a share.

The Australian dollar is worth US104.27c and €80.10c.

Economic data released today showed the sale of new cars, in Australia, in February was flat with 85,448 units had been sold; this result was slightly higher than what the market was expecting.

Juliana Roadley, CommSec Market Analyst

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