Australian Stock Market Report

Lunchtime REPORT
(12.30pm AEST)

It was a wild weekend for investors. The European market traded higher as no new news was seen as good news, but the US markets closed down on trouble in the finance sector and Chinese growth concerns wacked well-known companies. News that the US banking giant, J.P. Morgan Chase & Company. (JPM.NY) had disclosed trading losses from one of its derivatives trading businesses in London, that currently stand at US$2Billion and could blowout to US$3 Billion, shocked the market. The fact that this could happen to JP Morgan, the bank that has long been seen as the most stable and well managed bank in the US, rattled both large and small banking stocks on Friday. JPM.NY share price fell over 9%, while Citigroup (C.NY) came off 4.2% and Goldman Sachs (GS. NY) was down 3.9%.

On Saturday the news flow was both good and bad, unfortunately it does look like none of the smaller political parties in Greece can agree to unite to form a coalition government and this could mean that Greeks will go back to the polls. This news has led to new speculation that Greece will leave the European Union and return to using Drachma s its local currency within the year. At this stage this is only speculation but many economists now believe this would be the best way forward for the country.

Also on Saturday the Chinese Government it was easing monetary policy again by reduced its bank capital reserve ratios for the 3rd time in 6 months and the 2nd time this year. The Chinese central bank cut ratios by 50 basis points, and this means it will free up approximately US$20 billion for new lending power for the banks. This helped Australian markets open higher this morning, with the All Ordinaries Index (XAO) up 7 points at the open of trade. By lunchtime the All Ordinaries Index (XAO) the markets had lost ground and the index was only up 1 point at noon, with reduced gains in all sectors.

The banking sector, the S&P/ASX 200 Financials sector was up 0.13% in early trade. This did not really reflect the gains in the sector because Westpac Banking Corporation (WBC), off 3.13% of $0.70 to $22.01, after the company went ex-dividend today at $0.88 cents a share. Commonwealth Bank of Australia (CBA) added over 1% to $52.35. National Australia Bank Limited's (NAB) lifted by 0.77% to $24.73. Australia and New Zealand Banking Group Limited (ANZ) was up nearly 1% to $22.00, and QBE Insurance Group Limited (QBE) added another 1% to $13.25.

Explosives and fertiliser producer and distributor, Incitec Pivot Limited (PL) released its first half year profit to the end of March 2012. Pivot's Net Profit after Tax (NPAT) fell 13% to $143.5 million, hit by lower returns in its fertilisers division. While the companies explosives division continued to improve listing a 21% increase in earnings over the period. Incitec Pivot´s share price increased by 2.85% to $3.25, one of the most highly traded shares in morning trade.

Dulux Group (DLX) today released its first half year result to the end of March 2012. The company said its NPAT fell 1.6% to $47.9 million, hit by weak demand and higher costs. The company is confident about the 2nd half of the year. Dulux's CEO said " he expects its full-year adjusted net profit to be higher than the $77.6 million it reported last year, but it was dependent on economic conditions and excluding costs associated with the Alesco bid. Dulux launched a, $188.4 million, bid for building products company, Alesco Corporation(ALS) on the 1st of May. Dulux shares fell 0.66% per share to $3.01 while Alesco's share price was also lower down 0.5% to $2.05.

Commodity prices lost more ground on Friday and the gold and oil price have continued to fall in early Asian trade today. The US$ oil price is now at US$95.47 a barrel, just off its 2012 low. But expectations that the Chinese economy should get a boost from the ease in monetary policy helping keep investors positive, Woodside Petroleum Limited (WPL) added 0.575 to $33.68 and Origin Energy Limited (ORG) and Oil Search Limited (OST) also higher.

Base metal prices were mixed in the London Metals Exchange (LME) on Friday night. Today the S&P/ASX 200 Materials sector had lost 0.15 % by lunchtime. Rio Tinto Limited's (RIO) share price lost 0.44% to $60.80. BHP Billiton Limited (BHP) slightly higher at $34.40 and Fortescue Metals Group Limited (FMG) gave back 0.3% to $5.37.

Elsewhere, Lend Lease limited (LLC) shares lifted over 1 % to $7.58, after the construction firm's "Abigroup" secured part of the contract to build the new Victoria rail network from the city to the Maribyrnong River, the deal is worth 750 million. Leighton Holdings Limited's (LEI) subsidiary "John Holland" also won part of the deal, worth $570 million for Leighton. LEI share price came off 1.8% to $7.56.

Telstra Corporation Limited (TLS) regained some ground this morning up 0.69% to $3.63. Also, Sydney Airport (SYD) higher at $2.95 while rail operator QR National Limited (QRN) off another 1.4% to $3.45.

The Australian dollar (AUD) was unchanged over the weekend but this morning after the news that the Greek government looks less likely to form a sold government over the next week and could be force to leave the euro if the troubles continue the AUD fell. The AUD hit a low of 0.9996 in morning trade. The AUD is currently trading at US$ 100.05 and €77.66 cents.

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