Australian Stock Market Report

Lunchtime REPORT
(1.15pm AEST)

Friday our market had what many would call a "shocker" we had widespread selling as losses continued throughout the day by the close the All Ordinaries Index (XAO) has slumped by 110 points to 4,098 points. By the close the ASX had wiped out all of its 2012 gains, listing the worst weekly performance (down 5.6% this week) since September 2011.

European shares closed at new five month lows on as investor concerns still mounted about the potential for a euro-zone break up. Reports of a run on deposits at the Spanish banks, especially Bankia, after news the Ratings agency Moody´s cuts the credit ratings of 16 Spanish banks. And talk that we could see short selling of financial stocks once again banned by European regulators over the next few weeks. Short selling bans have not occurred since the Global Financial Crisis (GFC) ended. In the US markets also lower as European market concerns took over from the market enthusiasm from the Facebook (FB.N)launch on the NASDAQ.

Over the weekend the Leaders of the major Group of Eight nations (G8) indicated their desire for Greece to remain in the euro zone and agreed to supported greater economic flexibility.

On Sunday, the Chinese premier, Wen Jiabao, stating he would look at new ways of supporting growth on to help boost China's weakening economy.

While new concerns are building about Italy's ability to meet its new budget requirements after Northern Italy was hit by a magnitude 6 earthquake on the weekend.

Today the market here in Australia started stronger as investors bought back into banking, key mining and gold stocks. The Australian stock exchange´s leading index, The All Ordinaries Index (XAO) climbed 15 points at the open of trade and added over 25 points before starting to lose momentum into the afternoon trading session. By lunch time the markets had turned into the red and All Ordinaries Index (XAO) was only up 6 points to 4,105 points.

Most commodity prices regained ground on Friday night, with gold and base metals prices rising. The gold price was continually boosted by strong buying from Asian and European investors. Gold rebounded off a 10 month low last week and is now holding at US$1,594 an ounce. Gold is now seen as a strong defence against weakness in the euro and concerns over a slowdown in global growth. Newcrest Mining Limited (NCM) added 0.88% to $25.25, while Western Australian based gold miner, Regis Resources Limited (RRL) increased by 4.14% to $3.77 and St Barbara Limited (SBM) up 1.3% to $1.93. Alacer Gold Corporation (AQG) added 6.98% to $6.13.

Base metals on the London Metals Exchange (LME) closed slightly higher, and the S&P/ASX 200 Materials sector traded higher up 0.75% by lunchtime. Rio Tinto Limited's (RIO) share price added 1% to $55.77. The world's biggest miner, BHP Billiton Limited (BHP) was higher by 1.2% to $31.84, while Fortescue Metals Group (FMG) lost over 1.5% to $4.59 as uncertainty still grows over Chinese iron ore and coal demand in the next quarter. Sims Metal Management Limited (SGM) off 1.7% and Mount Gibson Iron Limited (MGX) off 2.75% to $0.88cents.

Other stocks to watch today, Building-materials supplier James Hardie Industries SE (JHX) added 1.4% in early trade by lunch the share price had fallen back by 0.64% even with its better than expected operating profit US$32.1 million off 4% in the fourth quarter, with full year operating Profit up 20% to $140.4 million. Hardies also told the market sales in the fourth quarter rose 7% to US$309.3 million.
Benchmark crude oil prices fell in response to weaker-than-expected US economic data and fears of a euro-zone break up. US NYMEX crude continued to lose ground in morning trade and now is holding at US$91.88 a barrel. Our big name energy players were mixed, with Woodside Petroleum Limited (WPL) gave back another 0.5% to $30.90 and Origin Energy Limited (ORG) down 1.49% at $12.53 and Oil Search Limited (OST) giving back over 0.8% to $6.58.

The banking sector, the S&P/ASX 200 Financials sector rebounded from Friday's lows up 0.4% in early trade. Commonwealth Bank of Australia's (CBA, was the weakest of the big 4 banks in early trade, only up 0.2% to $49.51. Westpac Banking Corporation (WBC) added 1.13% to $20.64. National Australia Bank Limited's (NAB) up just over 1% to $23.57. Australia and New Zealand Banking Group Limited (ANZ) now up 0.5 % to $20.95, while key insurers and regional banks continued to fall with QBE Insurance Group Limited (QBE) off by 1% to $12.33 and Suncorp Group Limited (SUN) off 1.4% to $7.63.

Toll Holdings Limited (TOL) one of the poorer performers on the exchange last week saw its share price fall another 0.7% to $4.27. While Asciano Limited (AIO) was off 0.2% in early trade to $4.52 and Qantas Airways Limited (QAN) flat at $1.43, and Virgin Australia Holdings Limited (VAH) also flat at $0.42 a share.

Elsewhere, Telstra Corporation Limited (TLS) higher in morning trade at 0.28% to $3.53, while Energy retailer AGL Energy Limited (AGK) lost 0.14%.

The Australian dollar (AUD) was still below parity with the US dollar .The AUD is currently at US$ 0.9858, the Aussie also lower against the Euro now at €77.04cents.

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