Australian Stock Market Report

Lunchtime REPORT
(1pm AEST)

The Australian share market lost ground for the second day in a row yesterday. The All Ordinaries Index (XAO) slumped by 44 points to 4, 332 points.

Overnight once again concerns over political stability in Greece and the possibility that the Spanish government might have to inject cash into or nationalising up to 5 of its banks, rocked European markets.

The US markets also held back by European concerns but after the Dow Jones Industrials Index bottomed out at negative 184 points the market turned started to improve. On news that Fannie Mae, the largest home lender in the US, posted a strong profit in the last quarter, and said it doesn´t need Treasury aid in the future. As well as the confirmation that the Greece's will receive the 4.2 billion euros that were promised as part of its bailout package from the European Union and International Monetary Funds (EU/IMF)tonight.

The Australian markets traded against the trend, opening higher with gains in mining and industrial stocks. By lunchtime the All Ordinaries Index (XAO) had held on to a 7 point gain to hold at 4,339 points.

Commodity prices continued to lose ground overnight with the oil price falling for the 6th straight session and heavy selling in gold and base metals. Our big name mining stocks had been hit hard over the last few days but in early trade today they have made a solid recovery. Today the S&P/ASX 200 Materials sector had gained 1.3 % by lunchtime.
Our large mining and energy players helped by the recent slide in the Australian dollar and talk that the Aussie could go back below parity. Rio Tinto Limited's (RIO) share price lifted 0.8% to $61.73, today RIO held its Annual General meeting (AGM) where Rio Tinto told the market that they are seeing signs of improvement. RIO is a little more confident about the outlook for commodities, even with the ongoing concerns in Europe and the US economic. Chief Executive Tom Albanese said "the key issue facing the company is the rising costs or business but Rio is tackling some of the challenges through its Mine of the Future program." Rio's rivals, BHP Billiton Limited (BHP) added 0.82% to $34.61 and Fortescue Metals Group Limited (FMG) up 1.13% to $5.39. Our largest listed gold miner, Newcrest Mining Limited (NCM) was up by 3.78% to $24.70 and Kingsgate Consolidated Limited (KCN) up over 3% to $5.72 and St Barbara Limited (SBM) adding over 2.5% even after news that the US gold price fall again overnight to below US$1,600 an ounce, now at a new 2012 low of US$1,593 an ounce.

Back at the start of May, Singapore telecommunications the owner of the Optus telecommunication network said it would look at reducing staff in Australia, cutting 750 jobs or 1 in every 12 jobs. As part of in a major restructure of its business designed to boost profitability. Today, Singapore Telecommunications released the full year results for Optus to the end of March 2012. Optus said its operating revenue increased by 0.9% to
$9.37 billion helped by a 1.6% increase in mobile revenue. Optus mobile subscribers lifted 4.6% to 9.068 million over the last year. SGT share price was flat at $2.53. Rivals, Telstra Corporation Limited (TLS) gave back 0.55% to $3.63 and Hutchison Telecommunications Limited, the owner of Vodafone, unchanged in early trade.

Overnight the US oil price lost more ground, but it has climbed back above US$96.80 in early Asian trade. S&P/ASX 200 Energy sector moved higher up 1.8%, with the biggest gains in the small to medium uranium stocks that have listed big falls so far this week. This morning Paladin Energy Limited (PDN) added 2.36% to $1.41 and Energy Resources of Australia Limited (ERA) up over 4.6% to $1.58. Today at RIO's AGM today management noted that its, "coal and uranium mines in Australia recovered well from the effects of the significant wet weather early in the year." Woodside Petroleum Limited (WPL) rebounded 1.5% to $33.43 as Santos Limited (STO) added 0.08% to $12.94. Origin Energy Limited (ORG) also going well, up by 1.9% at $13.15 and Oil Search Limited now at $7.04.

The S&P/ASX 200 Financials sector was hit again off 0.73%, with weakness across the board in the four major banks and key insurers. Westpac Banking Corporation (WBC), off 0.02% to $22.83, Commonwealth Bank of Australia (CBA) down 0.04%. National Australia Bank Limited (NAB) today released its official first-half year report. The numbers were in line with the unaudited guidance given buy the company 2 weeks ago when it released the update on its UK business, cash profit rose 4.8% to a record $2.83 billion and announced an interim dividend of $0.90cents a share. NAB share price fell 1.2% to $24.31. Australia and New Zealand Banking Group Limited (ANZ) was off 4.3% to $22.12 but the company did go ex-dividend today for $0.66 a share.

The all-important monthly jobs report was out at 11.30am (AEST) Australian Bureau of Statistics labour force data for April Employment rose by 15,000, another strong month of gains and higher than expected. The unemployment rate dropped to 4.9% Commsec Economist, Savanth Sebastian said "Back to back monthly job gains and the unemployment rate sliding to a one-year low. The latest employment figures provide a great deal of encouragement to policymakers, households and businesses. More people in jobs will mean more spending across the economy and more tax receipts for the government."

The Australian dollar (AUD) continued to trade lower overnight and fell to US$100.21. After the better than expected read on the Job front the Aussie dollar regained ground. The AUD is currently trading at US$ 101.05 and €78.06 cents.

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