Australian Stock Market Report – Midday 3/28/12

LUNCHTIME REPORT
(1pm AEDT)

After a quiet night on the overseas markets the Australian market opened a few points higher and has extended its rally throughout the morning. The U.S. markets were held back by weaker than expected home price data, a fall in consumer confidence for March and profit taking after Monday's big rally. Yesterday on the Australian Stock Exchange (ASX) key banks, health care as well as food and beverage retail stocks moved higher. Today most sectors are holding on to gains into the afternoon session. At lunchtime, The All Ordinaries Index (XAO) is up by 22pts or 0.5pct to 4,413.

At 11.30 am, The RBA released its half-yearly Financial Stability Review, its assessment on bank the system in Australia to the end of 2011. This result was very positive and helped boost the markets. The RBA said ´´larger banks are in a better position than they were a few years ago to cope with the tighter funding conditions and overseas dramas", and that company balance sheets have improved. Although there is still some concerns over the management of European debt that will be in focus into at least the middle of this year.

The S&P/ASX 200 Financials sector is outperforming the rest of the market, National Australia Bank's (NAB) share price is up 0.4pct to $24.76 and Australia and New Zealand Banking Group Limited (ANZ) also up 1.12 pct to $23.45 while Macquarie Group (MQG) is up 1.46 pct to $29.98 and QBE Insurance Group Limited (QBE) holding on to a 1.22 pct gain at $14.12.

The positive toned is boosting retail stocks with S&P/ASX 200 Consumer Staples sector up 0.9 pct. David Jones Limited (DJS) is up 1.7 pct to $2.39 and Woolworths Limited (WOW) and Wesfarmers Limited (WES) both up around 1 pct. More merger and takeover activity in the world grain handling and producing markets has helped GrainCorp Limited (GNC) add 2 pct to $8.96, while Treasury Wine Estates Limited (TWE) rebounding now up 0.73 pct to $4.15 after its 2 pct slide yesterday.

S&P/ASX 200 Materials sector is up 0.6pct. The country's second largest miner, Rio Tinto Limited, (RIO) is up 0.6pct to $64.49 after announcing plans to sell its diamond assets. Rival BHP Billiton Limited (BHP) adding 0.35pct to $34.54, while our largest listed gold miner Newcrest Mining Limited (NCM) also higher up 1.6 pct to $29.72.

Yesterday Leighton Holdings (LEI) was placed in a trading halt and this holt has been extended today, last traded at $23.75, as the construction company considers potential changes to its financial guidance. Leighton said the findings of the current quarterly review could prompt a revision of its earnings guidance. Major shareholder Hoctief Limited (HOT.GR) fell over 5 pct on the German Exchange overnight.

Elsewhere, News Corp (NWS) is up 0.8 pct to $19.55, and Telstra (TLS) is up 0.7 pct to $3.25.

The Aussie dollar lost ground overnight and is continuing to slide in early trade today. At 1pm AEDT the Aussie is buying US104.24c and €78.26c.

Juliana Roadley
CommSec Market Analyst