Australian Stock Market Report – Midday 7/31/2012

Lunchtime REPORT
(1pm AEST)

Once again European market rallied higher overnight, ahead of the outcome of The European Central Bank (EBC) meeting on Thursday. Then the market is expecting the ECB will announce new stimulus measures for the European economy. The US markets lost a little ground by the close as investors held back from buying ahead of the outcome of the US Federal Reserve´s 2 day meeting that kicks off later tonight.

The local share market opened higher this morning, helped by a lift in gold and metal prices overnight. At the open of trade the All Ordinaries Index (XAO) was up 14 points, hitting a 10 week high. By lunchtime, the All Ordinaries Index (XAO) was up 30 points to 4,296. The market showed a real mixture of moves this morning, most of the larger miners were higher but there were still some pocket of weakness in the smaller base metal and gold miners. Aussie investors were happy to get back behind the defensive foods and liquor retailers but still shy to back gas and electricity stocks.

The S&P/ASX 200 Financials sector was still ahead this morning, but only by 0.35%. Commonwealth Bank of Australia (CBA) continued its run higher up another 0.8% to $57.66 and Australia and New Zealand Banking Group Limited (ANZ) up 0.7% to $24.78 while Westpac Banking Corporation (WBC) lost 0.3% to $23.18. Insurance stocks were also mixed Suncorp Group Limited (SUN) gave back yesterday's gains, off 0.8% to $8.43 while QBE Insurance Group Limited (QBE) and Insurance Australia Group Limited moved higher.

The S&P/ASX 200 Materials sector added 1.36%, after BHP Billiton Limited (BHP) and Rio Tinto Limited (RIO) lifted by 1.7% in morning trade. Iron ore producer, Fortescue Metals (FMG) gained 1.4% back to $4.15, even with the news that Global iron ore prices had fallen again in the last 24 hours now at US$115.20 a dry tonne. Atlas Iron Limited (AGO) was stronger, up another 2.5% and Mount Gibson Iron Limited (MGX) lifted by 1.8%.

Our largest listed gold producer, Newcrest Mining Limited (NCM) jumped another 2%, to $23.73. The US dollar gold price continued to climb higher overnight.

The S&P/ASX 200 Utilities sector lifted 0.2%, helped by strong gains in the Energy Investment Vehicle Duet Group's (DUE) its share price up over 3.8% in early trade. Today Duet, the key stakeholder in: the Dampier Bunbury Pipeline (80%), United Energy Distribution (66%) and the Multinet Gas project (100%), told the market that it would internalise its management. The company is currently managed by AMP and MQG under a 50/50 JV arrangement. DUET has announced that it has come to an agreement with AMP and Macquarie to internalise the management function and this will help to cut costs and streamline the business. The up-front cost to transform the system will be $82 million with additional support cost but over-all it will be cheaper than its current set up.

S&P/ASX 200 Energy sector is the best performing sector this morning up 1.8%, even with the US$ oil price falling back below US$90/bl. Oil Search Limited (OSH) added 0.3% to $7.01 and Santos Limited (STO) up 0.9% to $10.75. Woodside Petroleum Limited (WPL) added 1.7% in early trade to $33.80 and Origin Energy Limited (ORG) up over 2.4% to $11.85. Origin today told that higher commodity prices have helped lift its Full year revenue up by 3% even with a fall in gas production over the year. Origin´s revenue came in at $856 million, Origins proven and probably reserves did slide over the year but this we because it had sold down its stake in its Australia Pacific LNG (Liquid Natural Gas) from 50% to 42.5% over the last year.

The Grocery and food wholesaler Metcash Limited (MTS) today announced it has purchased the remaining stake of the hardware chain Mitre 10, (lifting the stake from 49.5% to 100%). Metcash paid $46.5 million after Mitre 10´s financial year performance to the end of June met with managements criteria for total purchase. Metcash lifted 1.19% to $3.39. Wesfarmers Limited (WES) lifted by 1.1% to $32.91 and Woolworths Limited (WOW) added 0.75% to $28.94. JB Hi-Fi Limited (JBH) up 1.8% to $8.86.

Elsewhere, Telstra (TLS) held steady for most of the morning before giving back a little ground, now at 3.99. QR National Limited off 0.5% to $3.19 and Qantas Airways Limited (QAN) shares added 2.7% to $1.13 with rival Virgin Australia (VAH) today off 1.2% to $0.41.

The Australian dollar is worth US105.18c, €0.8567 and £0.6691.

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