Australian Stock Market Report – Midday 9/19/2012

LUNCHTIME REPORT
(12.45pm AEST)

The Australian market opened slightly higher today but fell in and out of the red in the first few hours of trade. The by lunchtime the All Ordinaries Index (XAO) was only 7 points higher at 4,425 points.

After a lacklustre night on overseas markets where the index mainly closed lower. Commodity markets were also mixed and the spot iron ore price did rally higher.

Today the defensive plays are still leading the market. Currently there is a lot of uncertainty about global growth and low trading in overseas market leaving our market directionless today.
Over the next few days we will receive more key economic data out of China and the US, home sales data and manufacturing numbers, and hopefully this will give a bit more guidance to Aussie investors.
The health care and retail sectors moved higher while or larger banks and miners lost more ground.

S&P/ASX 200 Materials sector added 0.15% by lunchtime, with Australia's 3rd largest iron ore miner Fortescue Metals Group (FMG) leading the charge. Yesterday Fortescue secured a new US$4.5Billion credit facility which it will use to refinance its bank debts. FMG shares were placed in a trading halt at $2.99 last Friday, its share price added 17% yesterday and this morning added another 4.8 % to $3.67. Atlas Iron Limited (AGO) added 0.9% to $1.61 and Northern Iron Limited (NFE) added 6% to $0.88. The US$ spot iron ore price added more ground, up 4.1% to US$109.60 a dry tonne. Our largest listed mining companies BHP Billiton Limited (BHP) and Rio Tinto (RIO) were overshadowed by the junior miners moves today BHP was down 0.3% to $33.85 while RIO up only 0.03% to $57.27.

The US dollar gold price closed fell US$2 an ounce in early Asian trade to US$1,769 an ounce, but it did not stop Newcrest Mining Limited (NCM) from adding 2% to $29.66. The share prices of our smaller gold miners were mixed by lunch with Alacer Gold Corp. (AQG) off 0.74% to $6.72 with St Barbara Limited (SBM) up 1.46% to $2.08.

With the recent pull back in commodity prices we have seen a lot of talk about the possible impact on the mining services sector. Today we saw mining contractor Macmahon Holdings (MAH) come out of a trading halt and tell the market it was cutting its earning guidance. Macmahon's also told the market its Chief Executive Officer (CEO) Nick Bowen has resigned, effective immediately, and MAH share price fell over 48%. By lunchtime the share price had regained a little ground but still was down 37.4% to $0.33. The company said it expects its Full Year Profit to hit $20-$40Million because of construction work uncertainty. The market was shocked because only 6 weeks ago MAH had said it expected to list a 20% lift in profit in the coming year which would have equalled around $67.28Million. Leighton Holdings (LEI) has a 20% stake in Macmahon Holdings and its shares fell 1.7% in early trade. AJ Lucas Group Limited fell 5.7% and GWA Group Limited (GWA) gave back 2.97%.

Today David Jones Limited (DJS) reported its Full Year Net Profit (NP). DJS profit fell 39.9%, as expected, to $101.1Million and sales were down 4.8%, to $1.87Billion, over the year. The company did say it had addressed excess inventory issues but its margins were lower over the year at 37.5% down from 39.1% in a tough trading environment. DJS said "it had contracted an independent property consultant to evaluate the potential sale price for 4 stores in the Sydney and Melbourne's CBD." DJS share price off 1.1% to $2.24.5cents. Rival department store retailer Myer Holdings Limited (MYR) up 1.09% to $1.86 and Metcash Limited (MTS) up 0.5% to $3.61. Woolworths Limited (WOW) up 0.18% and Wesfarmers Limited (WES) also slightly higher up 0.73% to $34.97.

Energy stocks are also lost ground. The oil price slide again overnight to US$95.53 a barrel. Oilsearch Limited (OSH) fell 0.5% to $7.68 while Santos Limited (STO) gave back 1.13% to $11.80 and Woodside Petroleum Limited (WPL) off 0.66%.

Financial stocks also remain subdued, with the S&P/ASX 200 Financial sector off 0.1%. Shares in Macquarie Group (MQG) fell by 0.17% to $29.07 and Commonwealth Bank of Australia (CBA) slightly lower at $55.25. National Australia Bank Limited (NAB) off 0.45%.

Elsewhere, Telstra Corporation Limited (TLS) added another 0.13% to $3.80 and CSL Limited (CSL) up 1.29% to $43.43. Cochlear Limited (COH) up 0.8% to $67.89.

The Australian dollar was also subdued, with 1 Aussie dollar worth US 104.21c but higher against the Euro at €79.88c.

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