Australian Stock Market Report

MIDDAY REPORT
(12.23pm AEST)

Overnight the US market were slightly higher after investors weighed up the good news that the US economy grew more than expected in the 2nd quarter of 2012, but then the Federal Reserve regional report on the economy, the Beige book, showed more signs that the US economy is still only recovering slowly.

On European and UK markets overnight the miners were hit hard and our miners felt the same pain this morning. The All Ordinaries Index (XAO) opened slightly weak this morning, and within the first hour the market had fallen by over 45 points. Mining, energy and industrial stocks were lower as investors ran to the safety of healthcare and big name retail stocks.

By lunchtime the All Ordinaries Index (XAO) was still down 45 point at 4,336 points., hitting a 2 week low. The profit reporting season is now in its last days today we saw the released of Full year results from, Lend lease (LLC) and Perpetual (PPT) but the big story of the day was the weakness in commodity prices.
The US$ iron ore price fell dramatically overnight off 5% to US$90.30 a dry tonne and base metals, gold also oil prices also fell. The US spot Iron ore price has fallen nearly 20% in the last 3 months as cheap ore continues to be sold into the markets from operators in Brazil and on the black market out of China. This is taking its toll on price valuations of our large, and minor, iron ore players.

The S&P/ASX 200 Materials sector was the real drag on the market again today down 2.8% as investors sold out of mining and building firms. The sharp fall in iron ore and losses across the board on the London Metals Exchange (LME), base metal market overnight, have hit hard. Today Australia's second largest miner, Rio Tinto limited (RIO) gave back 3.7% to $48.63 while the larger BHP Billiton (BHP) fell back another 2.4% to $31.89 by lunchtime. Fortescue Metals Group Limited's (FMG) shares have fallen by 3.3% to $3.53 and Atlas Iron Limited (AGO) off another 5.3% to $1.40 after reporting a lower than expected Full Year profit earlier this week. Steel and fertiliser stocks also lost ground. Arrium Limited, formerly OneSteel Limited, (ARI) off 6.7% to $0.69 and BlueScope Steel Limited (BSL) off 4.1%, with building firm, Boral Limited (BLD) also down over 3.5%.

The US gold price was also lower overnight, now at US$1,658 ounce, and today gold stocks have again been hit. Newcrest Mining group (NCM) off another 5% to $25.37. Kingsgate Consolidated Limited (KCN) off 4% and Regis Resources Limited (RRL) both lost over 2.74% in early trade.

The S&P/ASX 200 Energy sector also starting in the red, off 1.96% after the US oil price crept back below US$95 a barrel after Hurricane Isaac was downgraded to a Tropical Storm overnight. Even with over 93% of all oil instillations and many refiners closed there is now hope that all rigs will be back in action within the next week. Santos Limited (STO) shares off 3.5% to $11.14, Oil Search Limited (OSH) gave back 0.94% to $7.39 while Beach Energy Limited (BPT) off 3.24% to $1.19. Our only listed petroleum refiner, Caltex Australia Limited´s (CTX) shares fell back in morning trade off 2.1% to $15.53.

Global property developer Lend Lease Group (LLC) has impressed the market with a near 2% increase in FY12 profit, and forecast higher earnings in FY13. Net profit after tax for the 30 months to June 2012, came in at $501.4M, up 1.7%. Stripping out negative property revaluations of $5.8M, underlying profit rose by 4.5% to $507.2M. CEO Steve McCann says the group is well placed to deliver earnings growth in the current financial year, and has access to more than $2.2B of available liquidity. LLC's share price listed 2.3% to $8.38 in early trade. Westfield Group (WDC) off 1% and Leighton Holdings Limited(LEI) off another 4.3% to $16.26.

The S&P/ASX 200 Financials index moved slightly lower by lunch off 0.51%. The big 4 banks and major insurers were holding the index down in early trade. ANZ Banking Group (ANZ) slightly weaker off 0.7% to $24.80. National Australia Bank (NAB) giving back 0.8%, the best of the big 4 so far today. Commonwealth Bank of Australia (CBA) lost a little, off 0.37% and the insurers QBE Insurance Group Limited (QBE) off 0.3% to $12.97 and Insurance Australia Group Limited (IAG) off over 2% with Suncorp Group Limited (SUN) only down 0.17%.
Finance firm Perpetual Limited (PPT) reported its Full Year numbers today. Perpetual's Underlying Profit after Tax (PAT) fell by off 7% to $67.6Million and after significant items profit was off 57%. The company had already flagged major restructure costs over the last year and the market expected that the weak financial market environment would hurt the numbers. Perpetual's share price fell 0.56% to $26.85 in early trade.

Elsewhere, Telstra Corporation Limited (TLS) higher helped by safe haven trading. Virgin shares fell another 3.5% and, rival in the Sky, Qantas Airways (QAN) lost 1.7%. Travel firm, Flight Centre (FLT) giving back ground off 0.33%.

The Australian dollar (AUD) is buying US103.31 cents, €82.41cents and £65.25 pence.

[Kick off your trading day with our newsletter]