Australian Stock Market Report – Midday 6/5/2012

MIDDAY REPORT
(12.15pm AEST)

The Australian share market has rebounded from yesterday's two percent drop and is posting solid gains ahead of this afternoon's interest rate decision. At lunchtime in the East, the All Ordinaries Index (XAO) is firmer by 49.4pts or 1.2pct to 4082.8, after hitting a high of 4095 points.

US and European markets closed mixed overnight, but there's increasing optimism we could see stimulus injected into the global economy this week, in the form of a rate cut here, a potential rate cut from the European Central Bank later this week, and hopes the US Federal Reserve will hint at a third round of stimulus or quantitative easing when Chairman Ben Bernanke fronts Congress on Thursday.

Locally all sectors are looking strong, with energy stocks up 2.5pct. Index leader BHP Billiton (BHP) has added 1.3pct to $31.14 while gold miner Newcrest Mining (NCM) continues to add to yesterday's impressive gains, up a further 1pct to $24.77.

Financial stocks are also solid, with shares in the ANZ (ANZ) up 2.5pct to $21.40.

Qantas (QAN) meanwhile has fallen to an all-time low of $1.16 today after warning that its Full Year annual pre-tax earnings could sink by as much as 91pct due to European woes, soaring fuel bills and the cost of industrial action. QAN posted a FY 2011 profit of $552 million, but expects this year earnings could come in between $50-$100 million. At lunchtime in the East, QAN is down 16pct to $1.19.

The Australian dollar is holding up well ahead of this afternoon's monthly rate decision from the Reserve Bank. Money markets have priced in a 142pct chance that we'll see a rate cut of at least 25 basis points this afternoon. CommSec believes the official cash rate will be cut by a quarter of one percent, leaving the RBA further ammunition to deliver another rate cut if needed, perhaps in a couple of months. The AUD is worth US97.65c at 12.15pm AEST. It is also buying £0.6341 and €77.91c.

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