Australian Stock Market Report

Lunchtime REPORT (12.28pm AEST)

The Australian share market lost ground yesterday as the ongoing European concerns held markets and commodities back, with the All Ordinaries Index (XAO) ending off 36 points to 4,316 points.

Overnight the European markets fell to new four-month lows, as the markets reacted to both good and bad news out of the region. The good news was that Euro Zone Growth (GDP) was released showing, no change, or 0.0% growth in the March quarter, just enough to hold the Euro Zone out of recession. The Germany economy once again led the pack, listing 0.5% growth over the quarter better than the expected 0.2%. News that the ratings agency Moody's had downgraded 26 Italian banks in Asian trade yesterday also took its toll on Italy's MIB (Borsa di commercio di Milano - Milan Stock Exchange) sending the bourse down 2.56%. The Greek political stale mate has now led to and the Greek people heading back to the polls in the next few weeks and an interim government will be put in place today.

The US markets started off "ok" even with the negative Greek news and lower than expected US April retail sales. But with 1 hour left to trade the US markets sold off dramatically, after the current Greek President, Karolos Papoulias, released a document showing that Greek depositors withdrew €700 million (US$898 million) from local banks on Monday this week, this pushed stock markets lower and sent investors into the safety of the US dollar and US treasuries.

The Australian stock exchange´s leading index, the All Ordinaries Index (XAO), fell over 1% on the open down 42 points and by lunch time the loss had blown out to 77 points or 1.8% to 4,238 points, back to the lowest level since March this year.

The healthcare, down only 0.3%, and utility sectors, up 0.08%, were the best performers in morning trade as investors looked brought into defensive stocks and stocks that would gain advantage from a weaker Australian dollar.

Commodity prices continued to slide in overnight trade, in early Asian trade the US dollar oil price fell to US$93.38 a barrel and the Gold price was off $14 another ounce in electronic trade, to hit US$1,544 an ounce. Silver and platinum prices were also lower and base metals on the London Metals Exchange (LME) finished in the red, with US COMEX copper prices, for July delivery, hitting a 4 month lower overnight. Today the S&P/ASX 200 Materials sector had lost over 3% by lunchtime. Rio Tinto Limited's (RIO) share price lost 3.3% to $58.30. The world's biggest miner, BHP Billiton Limited (BHP) was hit hard after falling by 1.7% yesterday down another 2.8% in early trade to $32.90, after hitting $32.88 worst level since mid-2009. The country's third largest iron ore miner, Fortescue Metals Group (FMG) fell 3.9% to $4.90. Oil and gas producers fell with, Woodside Petroleum Limited (WPL) gave back 2.5% to $31.98 and Origin Energy Limited (ORG) down another 1.6% to $12.93 and Oil Search Limited (OST) off 1.4% to $6.73.

Industrial stocks were once again in the spotlight, after Toll Holdings Limited (TOL) released a guidance update. TOLL said it expects underlying earnings to ease this fiscal year, because of continued weakness in the Australian retail sector and the global apparel network. Toll is now expecting underlying earnings before interest and tax (EBIT) to fall to around $400-$420 million, this review implies a downgrade of 10-15%. Analysts had expected a write down of its retail footwear business (Footwork Express) for some time, and were today happy to see the company is conducting a full strategic review of its options for this business. Toll also mentioned that its Toll Marine Logistics (part of Toll Global Resources) was performing poorly, but the company will gain some added revenue from selling part of its automotive division. Toll shares were one of the most highly traded shares in morning trade off over 12% to $4.87.
Qube Logistics Holdings Limited (QUB) today announced that Prixcar Services Pty Limited (Prixcar) has entered into a binding agreement to acquire the vehicle distribution business presently owned and operated by Toll Limited through its Toll Global Logistics business. Toll has sold its Auto business into the PrixCar Joint Venture (JV) but Toll will still hold 50% of the JV and QUB now owns 25% of the business, Qube's share price fell 1.2% to $1.53. Brambles Limited (BXB) lost over 2.2% to $7.09 while Asciano Limited (AIO) fell over 2.75% to $4.58 with airlines and rail firms also weaker.

Building materials and aluminium supplier, CSR Limited (CSR) released its 2012 full year results to the end of March 2012 today. The company reported a fall in Net Profit after tax (NPAT) of 76.3 million, about $4 million below market consensus. The result was hit by continued weakness in the construction industry here in Australia. CSR management expect the Australian housing and construction industry to remain subdued throughout the year. CSR management said it expects the New Zealand housing market to continue to grow in 2012 - 2013, with dwelling starts in New Zealand expected to improve by about 15-20% over the financial year and its New Zealand businesses to gain from reconstruction investment as well. CSR's share price fell nearly 1.5% to $1.66.

The Westfield Group (WDC) today announced its first quarter update for the three months to the end of March 2012 saying it had seen ´´continued solid performance across the Group´s global operations´´. But Westfield also downgraded its forecasts for the 2012 full year, because of the challenging global retail environment, even though in the last quarter they have seen continued high levels of occupancy in its malls. WDC's share price fell over 2.2% to $9.22.

The banking sector, the S&P/ASX 200 Financials sector was once again lower down over 1.25% in early trade. Westpac Banking Corporation (WBC), off 0.8% to $21.71. Commonwealth Bank of Australia (CBA) added over 1% to $52.09. National Australia Bank Limited's (NAB) down near 1% to $24.41. Australia and New Zealand Banking Group Limited (ANZ), the worst of the big 4, was off 1.8% to $21.70. Key insurers and regional banks also lost ground with QBE Insurance Group Limited (QBE) off by 1.5% to $13.17 and Suncorp Group Limited (SUN) down over 3.5% to $8.11.

After a good run yesterday Telstra Corporation Limited (TLS) gave back ground this morning falling 1.2% to $3.66. While Energy retailer AGL Energy Limited (AGK) continued to climb up another 0.2% to $14.90 while Hastings Diversified Utilities Fund (HDF) added 0.5% to $2.39, above yesterday's conditional takeover offer price per share of $2.35 from Pipeline Partners Australia Pty Limited. Spark Infrastructure Group (SKI) lost ground in early trade off 1.3%. Coca-Cola Amatil (CCL) was one of the best performing companies on the market yesterday and in early trade has held up well in a negative market. CCL share price was up a few cents to $12.89. The major food and beverage retailers also moved into the red. Woolworths Limited (WOW) gave back 0.7% to $27.02 and Wesfarmers Limited (WES), owner of Coles, down over 1% to $30.46.

The Australian dollar (AUD) still below parity with the US dollar winning on all fronts overnight, with US dollar a new 4 month highs against the Euro overnight. The AUD is currently trading at US$ 0.9925 lower in morning trade, while the Aussie has gained a little against the Euro now at €77.99 cents.

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