Australian Stock Market Report

MIDDAY REPORT
(12.45pm AEST)

The Australian share market lost ground on Friday, with the All Ordinaries Index (XAO) falling 1% or 40 points.

Friday trade saw European markets closing lower after big downgrades to local banks as Moody's the rating agency cut ratings of 15 global banks with the worst of the downgrades occurring in European based firm. London and German markets also hit after the major Germany's business confidence index (IFO index) fell to a 2yr low. Spanish markets did close higher as investors were happy to see that the independent review into its banking system came in in line with overall expectations the Spanish market (Madrid IBEX) closed up 102 points or 1.5%.

The US markets were stronger as the outcomes of the US bank rating downgrades were much better than many had expected. After the close of the European markets German, French, Italian and Spanish leaders agreed on a plan to boost growth by adding €125 billion or 1% of Euro Zone gross domestic product (GDP). This is just a written agreement but at least they are now working together and it does lift confidence ahead of the European Union (EU) financial summit on Thursday and Friday this week. The news that the Greek Prime Minister will now miss the EU summit after eye surgery on the weekend and uncertainty that his Minister of finance, who is still in hospital after fainting on Friday, will not attend is a concern.

This morning the Australian market has opened weaker even with the SPI futures index indicating that the market was set to gain 13 points at the open of trade.
At lunchtime in the East, the All Ordinaries Index (XAO) is weaker by 46.7pts or 1.16pct to 4,046.

Commodity prices were mixed on Friday night with weakness in base metal prices on the London Metals Exchange (LME) but increases in gold and oil. In after-hours trade and into the morning session the US$ oil price continued to move higher as concerns mounted over Tropical Storm Debby as it hit the Florida coast line with 60mph winds. The US states of Florida and Texas now on medium alert and the US$ oil price has now climbed above US$80 a barrel. Shares in oil stocks still lost ground in morning trade, Woodside Petroleum Limited (WPL) fell 0.9% or 31 cents to $31.05 while Santos Limited (STO) fell 1.6% or 18 cents to $11.14. Oil Search Limited (OSH) off 1.4% to $6.27 after announcing that Stephen Gardiner will act as interim chief financial officer (CFO) to replace Zlatko Todorcevski who will take up the CFO position at pallets maker Brambles Ltd. (BXB). Brambles share price higher by 0.16%.

The US$ gold price was higher in early Asian trade, lifting to US$1,574 an ounce. Newcrest Mining Limited (NCM) continued its slide off another 3.4% to $22.24. Alacer Gold Corp. (AQG) off 5% and Kingsgate Consolidated Limited (KCN) off nearly 3% to $5.01.

Australia's largest miner, BHP Billiton (BHP) fell 1.7% to $30.96. RIO dropped by 1.21% to $55.34 and Fortescue Metals Group (FMG) 1.4% to $4.84, with Atlas Iron Limited (AGO) off 1.5% to $1.95.

The S&P/ASX 200 Financials sector fell over 0.75% with the big four banks are all lower. National Australia Bank Limited (NAB) lost 0.35% or 7 cents to $23.09. ANZ Banking Group (ANZ) fell 0.69% to $21.13, Westpac Banking Corporation (WBC) fell 1.18% to $20.49 while Commonwealth Bank of Australia (CBA) eased 0.63% to $51.36.

In the retail space, Billabong International Limited (BBG) share price was hit hard this morning after the stocks recommenced trading after its capital raising. The company said its Institutional Entitlement Offer was oversold and raised approximately $155 million at $1.02 a share. But the BBG share price fell from the open of trade, hit a low of $0.92.5 cents a share and at lunch was still down over 34% to $0.96 cents. CBA analyst Jordan Rogers said ´´The capital raising gives some time, but the next six months will be crucial for the business.´´ The wider S&P/ASX 200 Consumer Discretionary sector was down 1.4%, with rival in the outdoor leisure wear space Kathmandu Holdings Limited (KMD) off 14.9% to $1.06. Footwear retailer RCG Corporation (RCG) the owner of The Athlete´s Foot brand off 3% and Pacific Brands Limited (PBG) off 2% to $0.485.

At 12.45pm AEST the Aussie is buying US100.26c and €80.00c

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