Australian Stock Market Report – Midday December 1, 2014

A worker walks at the Nahr Bin Umar field, north of Basra, southeast of Baghdad, November 16, 2014. OPEC producer Iraq expects to base its 2015 budget on an oil price of $80 per barrel, Oil Minister Adel Abdel Mehdi told parliament on Monday. Picture taken November 16, 2014. REUTERS/Essam Al-Sudani (IRAQ - Tags: POLITICS ENERGY BUSINESS)

ASX 200 slips on oil

 A new month and a new week has started the same way the last month ended, with sellers in control. The ASX started the session with a 5 point loss before trading to the low point of the morning where the index chalked up a deficit of almost 47 points. Over the course of the morning there was little evidence that buyers saw value at the newly discounted levels which had taking the market to the lowest levels in around 6 weeks.

 The signals from US and European markets at week's end were mixed. European shares were largely flat on Friday with gains in the airlines sector offset by falls by energy companies. The FTSEurofirst 300 index was up less than 0.1%, the German Dax lifted for the 12th straight day, up by 0.1%, while the UK FTSE fell by less than 1 point and therefore less than 0.1%. US share markets ended Friday's shortened trading session largely mixed. As was the case in Europe the slump in the oil price drove trading with energy stocks and oil services companies falling while airlines soared. At the close of trade, the Dow Jones was up by 0.5 points or less than 0.1%. The S&P 500 index fell by 0.3% while the Nasdaq lifted 4.3 points or 0.1%. For the week, the Dow rose 0.1%, the S&P rose 0.2% and the Nasdaq rose 1.7%. For November, the Dow rose 2.5%, the S&P lifted 2.5% and the Nasdaq gained 3.5%.

 As lunchtime on the east coast approached most sectors measured by the ASX losing ground. Consumer related stocks were attracting closer scrutiny after grocery wholesaler Metcash reported a weaker than expected result. MTS said this morning that underlying net profit in the first half fell by 9% to $101.7 million as the group attempted to grow sales by cutting prices. The result was below market expectations of just over $105 million. Weaker outcomes in food, grocery and liquor were balanced by improving sales in the convenience, hardware and automotive business. As a result group revenue edged ahead by 1% to $6.6 billion in the six months to the end of October 31. Pre-tax earnings from MTS food and grocery business which comprises three quarters of total profit, fell by 18.4 per cent to $119.2 million. Same-store wholesale grocery sales fell 1.5%, The liquor business saw pre-tax earnings rise almost 7% to $24.9 million even though sales fell 3.6% to $1.48 billion. MTS shares were down more than 15% at lunchtime.

 Elsewhere, mining stocks faced more headwinds as base and precious metals declined on deflationary concerns after crude oil prices slumped on Friday. Copper prices also fell as mine workers at BHP's Antamina copper mine in Peru return to work this week after a three-week strike. Over the course of the last week alumina rose marginally to USD355/t while Iron ore advanced 1.9% to USD71.32/t. Of the bulk miners Fortescue Metals Group (FMG) was the worst performer losing almost 5%. Oil prices remained in decline with prices slumping on surplus concerns after OPEC maintained the group's production target of 30mb/d for 2015. Woodside Petroleum shares were down 5%.

 Weaker commodity prices have maintained pressure on the Aussie dollar which was at 84.25 US cents a short time ago.

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