Australian Stock Market Report

Lunchtime REPORT
(12.45pm AEST)

On Friday night the global markets were hit by concern and weak commodity prices. The Australian markets ended weaker with the All Ordinaries Index (XAO) down 35 points to 4,459 points.

Friday night, global markets weakened after US non-farm payroll numbers showed no great strength in the job market and concern ahead of the outcome of the government elections in Greece and France over the weekend. Key markets in Europe closed around 2% lower and the US markets also in the red.
News early this morning that the current French President Nicolas Sarkozy conceded defeat to Francois Hollande, the Socialist party leader, after the Socialists won around 52% of votes in its election. Hollande is pushing for better growth in France and less austerity (budget cuts). This win will have wide implications for the Eurozone and the Euro currency. Since the outcome the Euro has fallen 1 Euro dollar against the US dollar.

The Greek elections on the other hand are far from being won. There is a mix match of parties that are now trying to work together to claim control, after the 2 largest parties the incumbent Pasok Party, that voted for the tough austerity packages, and the New Democracy party- lead by the caretaker prime minister Lucas Papademos, did not win a majority of the vote. The anti-bailout party, Syriza, won 16.6% and Independent Greeks Party won 10.5%. Even with the minority parties polling well, The Communist Party winning 8.5%, The Anti-immigrant - Neo Nazi Party - Golden Dawn Party received over 7% of the vote at this stage. If a full decision can't be made in 2 weeks the Greeks will go back to the polls, this will only add more cost and political and social unrest.

At the start of trade the market fell in to the red, as expected, The All Ordinaries Index (XAO) down 59 points to 4,399 points, with big losses for energy and mining firms and non- essential retailers ahead of today's release of the March retail sales numbers. By lunchtime the All Ordinaries Index (XAO) was still down 81 points to 4,378 points, the better than expected March retail sales numbers had given some joy to the food and beverage retail stocks but most of the other areas of the market were still in the red.

Commodity prices fell on Friday night, with the US oil price now at 12 week lows, off over 4.4% on Friday as concerns over US growth and future demand for energy products led to the slide. US crude oil supplies now sitting at 21 year highs and news of higher future contact fees for anyone speculating in the markets have pushed prices lower in morning trade. The US oil price is now trading at US$96.30 a barrel off another 2.2% this morning or US$2.20. S&P/ASX 200 Energy sector off 3%, with Woodside Petroleum Limited (WPL) off 1.8% to $34.74 and Santos Limited (STO) falling 4.38% to $13.09. Origin Energy Limited (ORG) was lower by 1.7% to $13.15 and Oil Search Limited also off over 2% to $7.15.

Coal stocks also down, Whitehaven Coal Limited (WHC) today announced it has put in an offer to acquire the remaining shares in Coalworks Limited (CWK) that it currently doesn't own, for $1.00 a share which is a 17% premium to the closing price last Friday the 4th of May. Whitehaven's share price off 4.28% to $4.70 and CWK shares one of the best performers on the market this morning up 15.79% to $0.99cents. Gloucester Coal Limited (GCL) also higher up 0.13% to $7.53 while New Hope Corporation Limited (NHC) off 4.46%.

Our big name mining stocks hit hard, the S&P/ASX 200 Materials sector off 3% or 337 points. Rio Tinto Limited (RIO) fell 3.79% to $62.44 while BHP Billiton Limited (BHP) eased 3.5% to $34.75. Fortescue Metals Group Limited (FMG) fell over 3.8% to $5.32. Our largest listed gold miner, Newcrest Mining Limited (NCM) off 1.29% to $25.32 and Kingsgate Consolidated Limited (KCN) up 0.49% to $6.13, after the gold price rallied on Friday night but in early Asian trade has given back all Friday's gains and is now trading at US$ $1,638 an ounce. Manufacturer of industrial and specialty chemicals, commercial explosives Orica Limited (ORI) released its half year results today. The result was in line with market expectations with a first half profit till the end of March 2012 down 4%. Orica's Net Profit after Tax (NPAT) of $253.3 million was hit by the cost of a recent plant closure at $90 million. The company declared an interim dividend of $0.38 a share in line with expectations and its share price rose by 0.15% to $26.85.

The S&P/ASX 200 Financials sector off 1.18%, with the four major banks in the red. Westpac Banking Corporation (WBC) off 0.79% to $22.73 and Commonwealth Bank of Australia (CBA) down 0.68% to $52.26. National Australia Bank Limited (NAB) lost 1.6% to $24.72. Australia and New Zealand Banking Group Limited (ANZ) off 1.37% to $23.13 and merchant bank Macquarie Group Limited (MQG) off another 4.23% to $27.58.

S&P/ASX 200 Consumer Staple sector limited its early losses after today's Australian Bureau of Statistics retail sales result for March gained 0.9% over the month higher than the 0.2% expected by the market. This strong read for March helped list the quarterly result to 1.8%. Our 2 largest food retailers Woolworths Limited (WOW) and Wesfarmers Limited (WES) reduced early losses. Woolies still down over 0.8% at lunch to $26.66 and Wesfarmers the owner of Coles off another 0.75% to $30.36.

The Australian dollar (AUD) continued to lose ground against the greenback over the weekend, but has regained a little ground in morning trade after the better than expected read on retail sales for the month of March, and buys US$101.32 cents. The AUD is currently trading at €78.10 cents.

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