Australian Stock Market Report – Midday 4/24/2012

LUNCHTIME REPORT
(12.45pm AEST)

The Australian share market has managed to shrug off weak offshore leads and fears of a mass sell-down to start the trading day on a positive note. US and European markets slumped overnight, as uncertainty surrounds the future of the French and Dutch governments. The local share market started the trading day on a flat note, defying predictions of a 0.6pct fall and at lunchtime in the East is trading firmer by 903pts or 0.2pct to 4439.6.

Wesfarmers (WES) shares are trading higher, up 1.7pct to $29.84 in early trade after releasing its quarterly update to the market. Third quarter sales at Coles supermarkets rose 4.9pct on the year to $7.85 billion, as more customers chose to shop at the chain and more goods were sold. Sales came in at $7.85 billion, while Kmart sales rose 1.2pct in the quarter to $813 million. However Target sales slumped 4.4pct to $692 million. Rival Woolworths (WOW) shares are up 0.4pct to $25.93.

Also today, gold miner Newcrest (NCM) has updated the market, but its report was not as favourable. The gold miner has cut its forecasts for gold and copper production for 2012 after carrying out a major review of its operations. Newcrest says it's facing a variety of higher costs ranging from labour to energy and also weathering the impacts of the strong Aussie dollar. At lunchtime in the East, NCM shares are down 4.3pct to $26.41.

Other miners are also under pressure, due to falls in commodity prices overnight. Shares in BHP Billiton (BHP) have dropped 0.7pct to $35.09 while Rio Tinto (RIO) is off 1.3pct to $65.76.

Core inflation data was released today for the March quarter, coming in much lower than expected. The consumer price index rose just 0.1pct in the three months to March, for an annual inflation reading of 1.6pct. The trimmed mean number came in at 0.3pct for the quarter.

"Inflation is well and truly contained and the Reserve Bank is all but certain to cut interest rates on May 1," said CommSec Chief Economist Craig James of the data. "The low inflation data removes the last hurdle for the Reserve Bank to cut interest rates next month. The sluggishness in the domestic economy has ensured that businesses continue to absorb any increases in costs, while the strength of the Australian dollar continues to keep imported prices low. In addition the uncertainty and downside risks to the global economy have resulted in subdued commodity price in recent months."

The Australian dollar fell on the inflation data and at 12.45pm AEST is buying US102.78c, £0.6374 and €78.13c.

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