Australian Stock Market Report – Midday 7/3/2012

MIDDAY REPORT
(11.30am AEST)

Following a slightly stronger start to the trading session, the All Ordinaries Index (XAO) is currently unchanged. The energy sector was the best performer yesterday after oil prices shot up by 9.5 pct. Today, the oil and gas producers are holding the market back most significantly.

The S&P/ASX 200 Energy index is down 0.83 pct or 100.7 pts to 12039.1. Australia's second largest oil and gas producer, Woodside Petroleum (WPL) is down 1.95 pct or 65 cents to $31.17 while the smaller Santos (STO) is 1.1 pct or 12 cents weaker to $10.79. STO was first listed on the ASX back in 1954 and has a market capitalisation (number of shares on issue multiplied by the current share price) of $10.29 billion. The company provides natural gas to markets in Asia and Australia and has developed a number of oil and Liquefied Natural Gas (LNG) projects across the region. WPL is around 2.5 times larger than STO (in market cap terms).

David Jones (DJS) shareholders have certainly endured a rollercoaster of emotion over the past week, with shares jumping by 14.5 pct last Friday, slumping by 10 pct yesterday and gaining 1.29 pct or 3 cents to $2.36 at lunch today. This is following the withdrawal of the questionable takeover approach by EB Private Equity (a U.K group).

The four major banks are improving and are helping to keep the market largely unchanged. Westpac (WBC) is currently the best of the majors, up 0.7 pct or 14 cents to $21.60. National Australia Bank (NAB) is up 0.27 pct or 6.5 cents to $23.82, Commonwealth Bank of Australia (CBA) is 0.21 pct or 10.5 cents higher to $53.63 while ANZ Banking Group (ANZ) is edging higher by 0.18 pct or 4 cents to $22.39.

Our largest miners are mostly higher, with iron ore company Fortescue Metals (FMG) one of the better performers at lunch, up 1.34 pct or 6.5 cents to $4.92. Diversified iron ore miner, Rio Tinto (RIO) is up 0.94 pct or 53 cents to $57.04 while the larger BHP Billiton (BHP) is only 0.06 pct or 2 cents stronger to $31.74.

This morning, the latest building approvals report for the month of May was issued and recorded a bigger than expected 27.34 pct jump in the number of approvals in May. Keep in mind that this is following an 8.7 pct slump in April and that these figures are extremely volatile from month to month. More information (including commentary by Commsec Economists) will be released in the market close report.

At 2.30pm (AEST) today, the Reserve Bank of Australia (RBA) will be making its decision on interest rates. Rates are expected to remain steady at 3.5 pct following two consecutive rate cuts. Rates are currently at their lowest levels since November 2009. The market is currently factoring in a 15 pct chance of a rate cut this afternoon. Should the RBA surprise the market and reduce rates for the third straight month, the Australian dollar is likely to fall sharply.

Yesterday, markets in Hong Kong, Colombia and Chile were closed due to public holidays. Today, all markets will be open for trade.

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.

So far in trade at lunch, 454 million shares have been traded worth $1.05 billion. 341 shares are up, 315 are lower and 264 are currently unchanged.

The Australian dollar (AUD) is buying US102.6 cents, €81.6 cents and £65.4 pence.

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. Despite the stronger AUD, tomorrow's expected rate cut could put our dollar under pressure.

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