Australian Stock Market Report – Midday 7/19/2012

MIDDAY REPORT
(12pm AEST)

The Australian sharemarket is improving for the third time this week, with the All Ordinaries Index (XAO) up 1 pct or 43 pts to 4199.4. This makes it the second biggest improvement for local shares this month. All 12 sectors are trading higher, with the energy sector by far the biggest outperformer thanks to solid production numbers from Woodside Petroleum (WPL) and Santos (STO).

The S&P/ASX 200 Energy index is up 3.55 pct or 410.1 pts to 11973. The energy sector makes up around 5 pct of the local market. Australia's second largest oil and gas producer, Woodside Petroleum (WPL) is up 6.91 pct or $2.10 to $32.47 after reporting a 43 pct rise in production over the last quarter (April to June 2012). The commencement of production at its Pluto Liquefied Natural Gas (LNG) project in Western Australia (near Karratha) gave a healthy boost to its numbers, making up around 20 pct of the company's total revenue ($303 million).

WPL's Chief Executive Officer (CEO), Peter Coleman said that "This quarter saw continued strong performance from the foundation business further enhanced by Pluto production, which has exceeded expectations with the delivery of eight LNG cargoes."

One of the advantages of LNG over traditional gas is in its transportation. LNG takes up little space to transport and is also an alternative if travelling really long distances (where pipelines are not a viable option).

Smaller oil and gas producer, Santos (STO) is up 3.27 pct or 33 cents to $10.43 after reporting a 9 pct rise in its production and an 18 pct jump in revenue over the quarter. This is partly due to higher oil and gas prices in addition to a jump in sales.

The four major banks are improving with Westpac (WBC) the best at lunch, up 0.86 pct or 19.5 cents to $22.78. National Australia Bank (NAB) is up 0.5 pct or 12 cents to $23.89, Commonwealth Bank (CBA) is 0.43 pct or 22 cents firmer to $55.46, while ANZ Banking Group (ANZ) is edging higher by 0.35 pct or 8 cents to $23.04.

Hungry Jacks's founder, Jack Cowin is now an independent director on the Fairfax (FXJ) Board. He is considered to be a close friend of Australia's richest person, Gina Rinehart. The company's publications include the Sydney Morning Herald, The Age and the Australian Financial Review.

Gina Rinehart's business, Mrs Georgina Hope Rinehart and Hancock Prospecting Pty Ltd and its subsidiaries has an18.7 pct stake in FXJ. Rinehart's wealth is around 1.5 times greater than Mark Zuckerberg's, the head of Facebook and around 10 times greater than Oprah's. FXJ is up 0.44 pct or 0.25 cent to 56.75 cents today, but is down 21 pct since the start of this calendar year.

No major economic news is scheduled for release today; however the Head of Economic Research at the Reserve Bank (RBA) will be participating in a panel discussion at the Australian Economics Forum.

Following the end of daylight savings, major Asian markets will be trading between the hours mentioned below until October this year.

The Hong Kong sharemarket trades in two sessions each day and will now open for trade between 11.30am (AEST) and 2pm (AEST) while the second session is between 3.30pm (AEST) and 6pm (AEST).

Out of Japan, the first session will be between 11am (AEST) and 1pm (AEST) while the second session is between 2.30pm (AEST) and 5pm (AEST).

The Singapore exchange will be open for trade between 11am and 2.30pm (AEST) for the first session and then between 4pm and 7pm (AEST) for the second.

U.S futures are currently pointing to a stronger start to trade tonight. Dow futures are up 27 pts. The U.S market trades between 11.30pm (AEST) and 7am (AEST).

So far in trade at lunch, 710 million shares have been traded worth $1.91 billion. 410 shares are up, 286 are lower and 296 are currently unchanged.

The Australian dollar (AUD) is buying US103.7 cents, €84.4 cents and £66.2 pence. This seems to be a great time to travel to Europe, with the AUD hitting yet another fresh all-time high against the Euro overnight.

The market is currently factoring in a 42 pct chance of a rate cut next month, which is approximately a 20 pct drop in likelihood compared to a week ago.

The AUD is the world's fifth most traded currency behind the U.S dollar, the Euro, Japanese Yen and British Pound. The AUD accounts for around 7 pct of all foreign exchange trades.

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