Australian Stock Market Report

Lunchtime REPORT
(1.15pm AEST)

The Australian share market started the week stronger and has also gained in morning trade today, Yesterday the All Ordinaries Index (XAO) closed 26 points higher at 4,124 points. Helping to wipe away some of the pain from the 5.6% loss last week.

Overnight global markets moved higher on the back of positive vibes from the outcome of the Group of Eight nations (G8) leaders meeting over the weekend and news that Chinese officials are looking at ways of boosting growth this quarter and into the future.

Today the market here in Australia started stronger as investors bought back into transport, mining and energy stocks. The Australian stock exchange´s leading index, The All Ordinaries Index (XAO) climbed 21 points at the open of trade. By lunch time the markets had lifted and All Ordinaries Index (XAO) was up 35 points to 4,160 points.
We expected today was going to be a "low" news day, but that plan was thrown out of the water early in trade with some big announcements from Qantas Airways Limited (QAN), Boral Limited (BLD) and GrainCorp Limited (GNC).

Yesterday, Qantas Airways Limited (QAN) confirmed it will slash 500 engineering jobs and close its heavy maintenance base at Tullamarine, in Melbourne, by August as part of cost-cutting measures. While 400 of these jobs were already tabled they did announce an extra 100 job losses and hte market had not be aware of the Tullamarine closure.

Then today Qantas surprised the market with news it is splitting its international and domestic operations into two separate businesses from July. The market had been expecting an update from Qantas on its transformation plan and rumour had been circulating that the company would be broken into 2. Qantas will now have on trading entity, as usual, Qantas Airway's limited (QAN) with 4 separate business units under this one umbrella, Frequent Flyers, Jet Star, Qantas International and Qantas Domestic. Qantas shares increased 1% on the news to $1.44. Rival in the sky, Virgin Australia Holdings Limited (VAH) also added 0.6% to $0.42.25 a share.

Boral Limited (BLD) announced that Chief Executive Officer (CEO) Mark Selway had stepped down. This was unexpected by the market although some analysts were concerned about the recent purchase price of its new BGA, Gypsum Asia Business. Mr Selway has been in the role for around 2 years. BLD has announced that Ross Batstone, who is currently the Divisional Managing Director Boral Building Products, has been appointed Acting Chief Executive Officer until they find Mr Selway's replacement. Mr Selway will remain with BLD until the end of July to assist with the transition. Boral's share price fell over 0.5% to $3.54. James Hardie Industries Se (JHX) added another 4%, in morning trade, to $7.23 and Fletcher Building Limited (FBU) up another 2.16%.

Leighton Holdings Limited (LEI), the global construction group, today said it is now on track to report a full-year profit of between $400 million and $450 million. Leighton said its first quarter revenue was hit by losses at its Brisbane Airport project and the Victorian Desalination plant still the company posted first quarter revenue of 5.1 billion up 25% on last year. Leighton is planning on boosting its balance sheet by selling non-core assets and "hopes to prepare its Middle Eastern construction joint venture for a public float by 2016".Leighton's share price rallied 2.43% to $17.71.

Food and beverage retailers and primary producers have been in focus this week. Last week the basic retailers were one of the best performing areas of the market as investors moved into more defensive stocks. Yesterday they lost traction as investors moved back into more risk filled plays like miners and services sector stocks.

Today, GrainCorp Limited (GNC) is in focus after releasing its half year update to the market. Today GrainCorp announced it had improved its first half result, driven largely by higher earnings from storage handling and ports activities. GrainCorp also lifted its earning guidance, the company is now expecting to report Earns Before Income Tax and Depreciation (EBITDA) of $385-$415 million (up from $350-$380million) and Net profit after Tax (NPAT) of $185-$205 million for the full year, excluding Significant Items, up from $165-$185million. The upgrade is largely due to GrainCorp's strong forward program of export bookings and improved malt sales. GNC share price lifted 6.9% to $9.51.

Yesterday agribusiness Elders (ELD) reported a return to profitability for the first half if 2012. Today elder's share price lifted another 2.5% to $0.20.5 cents.

Print and publishing and distribution firm PMP Limited (PMP) gained another 3.75% after lifting 5 % yesterday on the news of a takeover offer, from ticketing and labelling group TMA, worth up to $252.5 million. PMP share price now holds at $0.40.5 cents.

The gold price was little changed overnight and is now holding at US$1,592 an ounce. Newcrest Mining Limited (NCM) off over 1.5% to $25.09, while Western Australian based gold miner, Regis Resources Limited (RRL) increased by another 4% to $3.95 and Alacer Gold Corporation (AQG) added 3.8% to $6.42.

Overnight base metals on the London Metals Exchange (LME) closed slightly higher, and the S&P/ASX 200 Materials sector traded higher up 1% by lunchtime. Rio Tinto Limited's (RIO) share price added 1.3% to $56.69. The world's biggest miner, BHP Billiton Limited (BHP) was higher by 0.4% to $32.23, while Fortescue Metals Group (FMG) rebounded by nearly 3% to $4.87. Sims Metal Management Limited (SGM) made back 1.7% and Mount Gibson Iron Limited (MGX) also regained yesterday's morning losses of 2.7% to $0.94 cents.

Benchmark crude oil prices US NYMEX crude turned higher after 6 days of losses up around US$1 to US$92.73 a barrel. Our big name energy players were mixed, with Woodside Petroleum Limited (WPL) gained 0.7% to $31.20 and Origin Energy Limited (ORG) turned higher by 1.9% at $12.84 and Oil Search Limited (OST) turned higher, up 0.8% to $6.84.

The banking sector, the S&P/ASX 200 Financials sector continued to move higher up 0.5% in early trade. Elsewhere, Telstra Corporation Limited (TLS) higher in morning trade up 1% to $3.58, while Energy retailer AGL Energy Limited (AGK) turned the corner adding 0.5% and APA Group (APA) the owner of "Australian Pipeline Trust" and gas distributer added 1%

The Australian dollar (AUD) was still below parity with the US dollar but continued to make back lost ground in morning trade .The AUD is currently at US$ 0.9904, the Aussie also lower against the Euro now at €77.40cents.

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