Australian Stock Market Report – Midday 7/18/2012

LUNCHTIME REPORT
(1pm AEST)

Overnight European market closed slightly lower after a weak business confidence report out of Germany. In the U.S. the stock markets moved higher, while gold and metal prices sold off. Overnight the Federal Reserve Chairman Ben Bernanke said the U.S. economy was weak but the FED did not plan on to take any further action at present to boost the economy.

U.S. investors were happy with the news that more stimulus was not off the table. Overnight the quarterly results from key U.S. stocks were also higher than the market expected. Goldman Sachs beat the street even with a slide in profit. The firm also expects to cut US$500 million in costs over the next year. Coca-Cola, the world´s largest soft drink company, also beat expectations strong sales in Asia offsetting losses in Europe, but cost did increase and are expected to stay high this quarter. Toy maker Mattel saw its shares rise on better than expected global sales of Barbie and Hot Wheels brands over the quarter. After the bell Intel Corp's results were not that startling but its shares held up well in after-hours trade.

This morning the Australian market opened lower, the key index's held back by more weakness in mining and energy stocks. At the open of trade The All Ordinaries Index (XAO) opened 12 points lower. At lunchtime The All Ordinaries Index (XAO) was off by 15 points to 4,160.

There was a lot of red on the screen in the mining sector this morning with The S&P/ASX 200 Materials sector off over 1.8% by lunchtime. Australia's largest mining firms, Rio Tinto (RIO) and BHP Billiton (BHP), both lower after reporting quarterly production numbers over the last 24 hours. RIO has released its June 2012 production report just before the close of the markets yesterday, which was largely in line with our expectations. RIO's iron ore demand hit a new record high, its Pilbara expansion remains on track, with production and shipping capacity increasing and mined copper production increased by 5% year on year. But RIO's management were cautious about future demand. The RIO share price fell over 3% in morning trade after falling nearly 1% late yesterday.

BHP's numbers were also strong, reaching new heights in Iron ore production with another record for iron ore with production increasing 8% on the March quarter to 40.9Million tonnes. A good performance from the petroleum division with a lift in natural gas production helping to offset the fall in oil production off 8 %, reflecting the closure of BHP's facilities in the Gulf of Mexico. Copper was also strong and BHP's Queenland coal assets showing good growth. But today investors are concerned about the outlook and long term slides in ore prices. BHP fell over 1.5% to $30.29.

Fortescue Metals (FMG) issued their second quarter production report yesterday. FMG's shares price has fallen another 3.4% to $4.38.

The gold sector was also hit in morning trade as the gold price lost ground overnight. Newcrest Mining Limited (NCM) fell over 2.9% to $21.37, while Kingsgate Consolidated Limited (KCN) lifted 2.4% and Regis Resources Limited (RRL) added another 1.1% to $4.15.

The S&P/ASX 200 Energy sector also lower off 1.5% by lunch even with the U.S dollar oil price higher overnight. Shares in Woodside Petroleum Limited (WPL) gave back 0.8 % to $30.86, Santos Limited (STO) off 2.7% to $10.11 while Caltex Australia Limited (CTX) gained another 0.24% to $14.55. NSW based coal miner, Whitehaven Coal (WHC) lost another 1.5% to $3.88 as investors wait on more news of its latest takeover offer.

The S&P/ASX 200 Financials sector gained 0.3% in a negative market, helped by our big 4 banks all higher. Commonwealth Bank of Australia (CBA) up 0.9% to $55.43 and Australia and New Zealand Banking Group Limited (ANZ) added 0.5% to $22.99. In morning trade Westpac Banking Corporation (WBC) lifted by 0.3% to $22.57 while Macquarie Group Limited (MQG) lost ground off 1.5% to $24.96.

Asciano (AIO) the port and transport firm, announced plans to expand its container terminal at Port Botany. The cost of its new expansion and the building of new facilities will come in around $348million. The impact of the changes will increase productivity and reduce the need for staff and 270 jobs will be cut by the end of 2014, initially the share price fell away on the news but by lunch Asciano had increased by 1.6% to 4.41. Toll Holdings Limited (TOL) off 0.5%

Elsewhere, Wesfarmers Limited (WES) added 0.3% while rival Woolworths Limited (WOW) lost 0.26%. Department store owner Myer Holdings Limited (MYR) added 0.6% while its rival David Jones Limited gave back over 1.3% to $2.28.

The Australian dollar (AUD) hit a new all-time high against the Euro overnight breaking through €0.84 cents and also gained against the US dollar and the pound. 1 AUD is now buying US103.07cents and €0.83.82 cents.

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