Australian Stock Market Report – Midday 5/9/2012

Lunchtime REPORT
(12.20pm AEST)

The Australian share market improved slightly yesterday, with the All Ordinaries Index (XAO) rising by 14.3 points to 4,375 points. But the gains were short lived as more concerns over Greece and Spain hit European markets overnight and pushed euro and US stocks lower. Once again the likely hood of Greece leaving the Euro is front page news and the Spanish government overnight saying it would most likely have to bail out the 4th largest listed bank in Spain Bankia, to stop it for going under. Bankia had the largest exposure to the loss making property market in Spain and Portugal, and the bank could need up to €10 billion to survive. The political uncertainty in Greece saw its stocks market fall another 3.6% overnight. As the leader of Greece´s far left-wing Syriza Party said that if he was to form any part of the new coalition government he would look at "tearing up the terms of the European Union and International Monetary Funds (EU/IMF) bailout deal and start again.

The 2012 Federal budget was released overnight, but the market did not really react to any set outcomes.
It will be a tough ask for the current government to meet its planned budget underlying cash position turnaround from a deficit near $44 billion dollar in the current financial year to a surplus of $1.5 billion in the next. The impact of the rollout of the mining tax has given the government money to spend on Families and services. The implementation of the carbon tax in the next financial year has prompted the government to boost upfront payments this could help restimulate the ailing retail sector.

By lunchtime the All Ordinaries Index (XAO) had lost 40 points to 4,337 points, with weakness in the mining, banking and energy sectors, with the telecommunications and media sectors moving higher.

Commodity prices continued to fall overnight, with the US oil price still at 12 week lows, the US oil price is now trading at US$97.00 a barrel. S&P/ASX 200 Energy sector gave back yesterday's gains and feel 1.84%, with the biggest slides in the small to medium oil and uranium stocks. Woodside Petroleum Limited (WPL) lost 2.6% to $33.45 as Santos Limited (STO) moved lower, down 1.5% to $12.86. Origin Energy Limited (ORG) was lower by 0.9% also trading at $12.86 and Oil Search Limited now at $6.98.

Our big name mining stocks hit hard overnight and at the start of trade today. Today the S&P/ASX 200 Materials sector lost 1.64 % at lunch. Rio Tinto Limited (RIO) down by 1.37% to $62.43 while BHP Billiton Limited (BHP) lost 0.95% to $34.34. Our largest listed gold miner, Newcrest Mining Limited (NCM) was off by 3.5% to $25.22 and Kingsgate Consolidated Limited (KCN) off over 6% to $5.55, after the US gold price fall again overnight to US$1,600 an ounce off over US$35 an ounce, hitting a 2012 low.

The S&P/ASX 200 Financials sector was hit again off 0.68%, with weakness across the board in the four major banks and key insurers. Westpac Banking Corporation (WBC), the best of a bad lot, off 0.13% to $22.80, Commonwealth Bank of Australia (CBA) down over 1% to $51.54. National Australia Bank Limited (NAB) lost 0.28% to $24.76. Australia and New Zealand Banking Group Limited (ANZ) was off 0.5% to $23.00, while merchant bank Macquarie Group Limited (MQG) also down over 1% to $27.18.

S&P/ASX 200 Consumer Staple sector fell into the red from the start of trade today, off 0.06% one of the better performing sectors. Today our 2 largest food retailers Woolworths Limited (WOW) higher in morning trade up 0.49 % at lunch to $26.63 and Wesfarmers Limited (WES), the owner of Coles and Bunnings, lost a few cents to $30.12. While there smaller rival in the grocery space, Metcash Limited (MTS) added more ground up 0.50% in early trade to $4.09. Billabong International Limited (BBG) today announced it will change its CEO replacing Derek O´Neill with a former Target boss, Launa Inman. The highly respected, head of BBG's US business, Paul Naude, has also been promoted to "President of the Americas". BBG's share price fell 1.88% to $2.35.

Elsewhere, Telstra Corporation Limited (TLS) added 0.83% to $3.65 on a positive broker report and Leighton Holdings Limited (LEI) up 0.88% to $19.42 after saying it had been named preferred contractor for the major iron ore producer Fortescue Metals Group's (FMG) Solomon iron ore project in WA´s Pilbara. Leighton's share price added 2.4% to $19.48, while Fortescue only lost 0.47% to $5.32.

The Australian dollar (AUD) continued to trade lower and buys US$100.70 cents. The AUD is currently trading at €77.66 cents.

[Kick off your trading day with our newsletter]