Australian Stock Market Report – Midday 7/19/13

MID-SESSION REPORT
(12.30pm AEST)

It would be reasonable to feel let down by the performance of the local share market on Friday. Most boxes were ticked for a positive session given the developments in the US and Europe overnight. As result the ASX started in positive territory, although the gains were short lived. At its best levels the index was up 7 points. At lunch time the market was plumbing its lows of the day with losses in the range of a half a per cent.

Most sectors were weaker in the first half day although miners were the main weight. This result again is perhaps counter intuitive, perhaps, given the better tone seen for commodities in the last 24 hours which included gains for coal and iron ore prices.

As we approach the reporting season locally, the prospect of profit warnings looms large in the thinking of market participants. Explosives maker Orica (ORI) was marked down heavily, falling by 14%, after downgrading full year profit expectations. The group expects net profit for the full year to be down 10% compared to last year's result of $650.2 million. A familiar refrain was offered as an explanation for the downgrade, with economic conditions being cited in addition to higher than expected costs related to its tunnelling business.

Sydney Airport shares rose more than 1 % in the wake of solid traffic numbers being reported. International passenger numbers were up 3.6% in the month of June, compared to a year ago, reflecting an increase in UK visitors for the British and Irish Lions´ tour. Total passenger numbers rose 2.7% in June compared to the same time last year, which included a 2.4% increase in domestic traffic.

The energy sector was amongst the bigger losers. Santos (STO) were 2% lower on the back of a softer quarterly production report. The oil and gas producer cut its production forecasts due to problems caused by supply, weather and infrastructure. Santos reduced its 2013 production guidance to 52-55 million barrels of oil equivalent (mmboe), down from a range of 53 to 57 mmboe previously. The revision was due in part to deferred production from the Chim Sao oil field in Vietnam due to problems with its offshore production and shipping facility

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