Australian Stock Market Report

LUNCHTIME REPORT
(1pm AEST)

Yesterday, the Australian share market closed lower for the third straight session, with the All Ordinaries Index (XAO) giving back another 13 points to 4,382 points.

Overnight Global markets were hit by more negativity: the backlash from the protest and riots in Spain and Greece, more poor economic data and renewing fears of a lengthy Eurozone downturn.

The Spanish market closed nearly 4% lower ahead of the Spanish government´s release of its 2013 budget plan later today and regional infighting putting pressure on regional banks. Italian retail sales fell 3.2% in July 2012 compared to July 2011 and off 0.2% over the month. As well as more bad news for France with its unemployment level hitting 3 million people for the first time since June 1999.

In the US, markets hit by the slide on European and commodity markets and then the weaker than expected homes sales numbers. New home sales eased from an annual rate of 374,000 to 373,000 in August down by 0.3% while new mortgage applications did increase slightly. The Dow Jones ended the session off another 44 points.

At the open of trade today our market continued its downward run. As more weakness crept into mining and energy stocks. By lunch time the All Ordinaries Index was only off by 15 points to 4,380, as the weakness in banking and finance stocks abated but the slides in mining stocks increased. The overnight slide in the Aussie dollar helped reduce the losses on larger miners and building material stocks in morning trade.

Then at 11.30am (EST) - news that China's central Bank had injected a record 365Billion Yuan this week into the markets.

The Chinese Central Bank (PBoC) usually does buy and add extra liquidity into its markets before Golden Week. The central bank provides extra liquidity to the banking system ahead of the big up-tick in consumer spending, and it is a normal part of its central bank operations. The way the PBoC has injected the funds is through a financial instrument called a reverse repo, (a short term funding tool) so the funding will provide liquidity for just two weeks. The RBA does something very similar ahead of Easter and during the Christmas shopping period. But this year the injection is larger previous years so the market was happy with the news.

All Ordinaries Index rebounded and by lunch was only off 2 points to 4,380 points.

The turnaround story helped mining and energy stocks but to a greater extent pushed the banks and insurers higher.

The S&P/ASX 200 Materials sector was off 1.3% but by lunchtime had recovered and was only down 0.05%. Overnight global growth concerns pushed gold oil and base metals on the London Metals Exchange (LME) lower. The Gold price has rebounded in early Asian trade to US$1,758 an ounce up US$5 an ounce. Our largest listed gold producers Newcrest Mining Limited (NCM) turned higher up 0.5% to $27.85 and Regis Resources Limited (RRL) regained yesterday's losses up 1.5% to $5.45.

The broader metal market fell but has now recovered a little, BHP Billiton (BHP), off another 0.6% to $32.60. Rio Tinto (RIO) added $0.07 to $52.96. Australia's third biggest iron ore miner, Fortescue Metals (FMG) gave back 0.8% now only off $0.03 but was off $0.10 early in trade to $3.48. Arrium Limited (ARI) turned higher up 1.4%, while BlueScope Steel Limited (BSL) continued its solid run, slightly higher up 1.27% up nearly 18% over the last month.
Energy stocks lost ground, after the US oil price fell below US$ 90 a barrel, overnight. Woodside Petroleum Limited (WPL) off 0.06% to $33.04 and also down Santos Limited (STO) basically flat at $11.20 while New Hope Corporation Limited (NHC) lifted by 1.55%.

The industrial sector was hit hard over the last few days but has rebounded today. The slide in the US oil price has helped the transport stocks this morning. Qantas Airways Limited (QAN) slightly lower at $1.2% while QR National Limited lifted 1.34% to $3.40 and Sydney Airport (SYD) up near 1% to $3.17.

Even the service sector stocks that have been hit hard this week are rebounding, UGL Limited (UGL) up 1% to $10.57 and Downer EDI Limited (DOW) added 1.9%.
The big news story this morning was that Woolworths Limited (WOW) had finally sold off its Dick Smith Electronics chain for $20 million to private equity group Anchorage Capital Partners. WOW is expecting all details to be finalised by the end of 2012. Great news as they will also be out of many large retail lease obligations freeing up cash for other projects. WOW also told the market this morning it had sold down some of its investment assets and sold a distribution centre in India. Wow share price still lost ground off 0.9% while its rival in the food space, Wesfarmers Limited (WES) lifted slightly to $34.50.

The S&P/ASX 200 Financial sector opened lower but the major banks finished higher at lunch the big name banks had bounced back in line with gains in Asia. National Australia Bank (NAB) up slight to $25.48 while Westpac (WBC) made back 0.3% to $24.59, Australia and New Zealand Banking Group Limited (ANZ) added a few cents or 0.4% to $24.60 and Commonwealth Bank (CBA) edged higher by 0.16% to $55.46.
Insurers; Suncorp Group Limited (SUN) added 0.3% and Insurance Australia Group Limited (IAG) also higher up 0.11% to $4.37.

The Aussie dollar regained some of yesterday's lost ground in early trade now buying US103.90c and €80.68c..

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