Australian Stock Market Report – Midday 7/23/2012

MIDDAY REPORT
(1pm AEST)

The Australian share market opened weaker this morning after overseas markets sold off on Friday. Once again European debt concerns and a pull-back in global iron ore and coal prices along with end of week profit taking took its toll on markets.

Euro zone finance ministers approved a bail-out package of €100 billion for the Spanish banking sector on Friday. But the positive news was offset by the decision of Spain´s indebted eastern region of Valencia to apply for help under the national government´s assistance package. This added to concerns that Spain might be the next cab off the rank to ask for bailout funds. Adding to worries over Spanish bond pricing with 10 year Spanish bond yields rallying on Thursday and Friday and European banks losing more ground.

Locally The All Ordinaries Index (XAO) opened 42 points lower, but by lunch time the market had lost more ground and at 12.30pm The All Ordinaries Index (XAO) was off 56 points or 1.35% to 4,174 points. And the Australian dollar has also been hit this morning losing ground against the US dollar and even the Euro.

The miners and energy firms were the hardest hit this morning, The S&P/ASX 200 Materials sector was down over 3.1% at lunchtime with weakness not only in the larger mining firms but weakness across all sizes and material types. On Friday night metal prices gave back gains on the London Metals Exchange (LME) and the big guns; BHP Billiton Limited (BHP) and Rio Tinto Limited (RIO) both fell around 3%, with BHP now at $30.42 and RIO at $51.82. Iron ore miner, Fortescue Metals Group Limited (FMG) fell another 5%, after listing a 5% slide on Friday, Fortescue now at $4.13, as Iron ore prices (spot market) continued to trade near eight months lows. Mount Gibson Iron Limited (MGX) off 4.26% and Sims Metal Management Limited (SGM) off 5.5%.

Shares in the S&P/ASX 200 Energy sector fall back again in early trade. The US$ oil price broke through 7week highs on Friday before closing US$1 a barrel weaker at US$91.52 a barrel. Woodside Petroleum (WPL) lost 1.5% to $32.28 and Santos Limited (STO) gave back over 2.9% to $ $10.24. Origin Energy Limited (ORG) off another 2.2% and Whitehaven Coal Limited (WHC) also off near 2%.

Smaller energy players that listed gains on Friday fell back into the Red, Beach Energy Limited (BPT) off 2.8% as takeover rumours still circulate in the media but no firm announcement from the company as yet.

Financial stocks followed the losses from U.S. banks over the last few days. Shares in the Commonwealth Bank of Australia (CBA) backed off another off 0.8% to $54.90. National Australia Bank Limited (NAB) and New Zealand Banking Group Limited (ANZ) both lost 1.25%. The insurers were also weak with AMP Limited (AMP) off 2% to$3.87 with Insurance Australia Group Limited (IAG) one of the better performers, still off 0.3% to $3.72.

The best performing sector this morning was the S&P/ASX 200 Consumer Staples sector up 0.36%, thanks to a stronger than expected sales report from grocery heavy weight Woolworths Limited (WOW). Woolies share price lifted 1% to $27.93 after the company reported a 4.9% increase in its supermarket division sales for the year. Woollies management did say it had overcome tough trading conditions this year and over the last few weeks of the trading period had enjoyed a pick-up in sales, but deflation was still a concern. Wesfarmers Limited (WES) up 0.59% to $32.23. Coca-Cola Amatil Limited (CCL) off 1.2% and Goodman Fielder Limited (GFF) off over 6% after telling the market that it expects its Full Year 2012 earnings to come in at the lower end of its current forecast of $230 to 245Million.

The Australian dollar continues to gain ground as global central banks continued to by our currency, 1 Aussie dollar is worth US103.11c and €0.8511.

[Kick off your trading day with our newsletter]