Australian Stock Market Report – Midday 5/30/2012

LUNCHTIME REPORT
12.45pm AEST

Local stocks are coming off the recent two day rally, despite gains on US and European share markets overnight. US stocks resumed from the long weekend holiday to gain more than one percent, while European markets recorded healthy gains thanks to cyclical stocks. Profit takers though appear to have moved in on the local share market, with the All Ordinaries Index (XAO) down 35.4pts or 0.8pct at lunchtime in the East to 4312.8.

Financial stocks have shed around 0.7pct in early trade. Shares in the Commonwealth Bank (CBA) are down 0.8pct to $49.47 while Westpac (WBC) has added 1.2pct to $20.31.

Energy and mining stocks have also slumped in response to weaker commodity prices. Shares in index leader BHP Billiton (BHP) are down 1.2pct to $32.01 at lunchtime in the East.

Meanwhile Origin Energy (ORG) has fallen almost 2pct to $12.85 after announcing its considering writing down the value of its share in a US solar power joint venture. Origin has cited a global oversupply of solar cells for its decision to cancel the production of more panels in the US state of Idaho.

Economic data released today shows Australian consumers remain cautious. After a bumper rise in retail trade in the month of March, sales fell 0.2pct in April, versus expectations of a rise of 0.2pct.

The weaker than expected retail sales numbers have increased the chance of a rate hike next week, with money markets factoring in a 125pct chance rates will be cut by 0.25pct. CommSec believes the RBA will stay on the sidelines until the next set of inflation figures come through at the end of June. CommSec is still pencilling in a rate cut in August.

The weaker than expected retail sales numbers has seen the Aussie dollar slump below US98c. At lunchtime in the East, the Aussie is worth US97.83c, £0.6266 and €78.52c.

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