Australian Stock Market Report – Midday December 3, 2014

Australian Finance Minister Mathias Cormann (R) and Medibank Managing Director George Savvides ring the Australian Stock Exchange Bell to begin trading of Medibank stock in Sydney November 25, 2014. Australian health insurer Medibank Private Ltd, which raised $4.9 billion in Asia's biggest IPO in two years, had a strong stock market debut on Tuesday as investors sought exposure to the country's booming health industry. REUTERS/Jason Reed (AUSTRALIA - Tags: POLITICS BUSINESS HEALTH TPX IMAGES OF THE DAY)

ASX shrugs off weaker commodity prices

 Local shares saw a mixed start to trade on Wednesday after the strong gains of the previous session. The ASX 200 opened with a loss of 20 points, however those levels found buying support and over the ensuing hours the market was able to fight its way back into positive territory. At the best levels of the morning the index was up by 50 points and as lunchtime loomed every ASX sector was in positive territory.

 The news pulse from the US and Europe was generally positive overnight with solid gains on both continents as the SP 500 rose by 0.64% on positive economic news. In Europe shares generally rose as energy stocks responded to the higher oil prices a day earlier. The FTSEurofirst 300 index rose by 0.5% and the UK FTSE rose by 1.3%. But the German Dax lost 0.3% after trading just short of record highs during the session.

 The feature of the local session on Wednesday was the continued support for the discounted mining and energy sectors, even though commodity prices weakened over the last 12 hours. World oil prices fell giving back some of the previous day's solid gains. A stronger US dollar acted to put downward pressure on commodity prices. US Nymex crude price fell by US$2.12 or 3.1% to US$66.88 a barrel. Base metal prices fell by up to 3.0% on the London Metal Exchange on Tuesday with aluminium leading the declines. At the same time gold retreated as Comex gold futures fell by 1.5% to US$1,199.40 per ounce. Iron ore fell by US90c to US$69.70 a tonne on Tuesday. Despite the weaker underlying prices Mining and energy stocks were outstripping most other sectors in terms of gains. Fortescue Metals Group (FMG) shares were up by 5.5%

 Company news was thin on the ground, although the widely vaunted takeover representations for the TEN Network finally emerged on Wednesday. The broadcast said that it had received proposals from several parties during a submission process that ended on yesterday. The proposals are conditional and non-binding although they could lead to a takeover or a debt refinancing. The group wouldn't identify those party to the process although recent press speculation has turned around cable TV operators Discovery Communications the U.S. and Australia's Foxtel in the main. TEN shares were down by more than 6 %.

 Consumer related stocks also attracted buying over the morning. Woolies (WOW) shares rose on news the grocer had made a foray into the Chinese beverage market by acquiring one of the country's largest alcoholic drinks distributors. WOW announced that it had bought Summergate Fine Wines and Spirits which distributes imported alcoholic beverages across China in addition to owning a retail business called Pudao Wines. Woolworths did not reveal the price attached to the purchase, although it expects strong growth from Summergate, which was founded in 1999 by current general managers Ian Ford and Brendan O'Toole. WOW shares were up 1.3%, Wesfarmers (WES) shares were up by 1.4%

 The Aussie dollar fell sharply following the release of much weaker than expected quarterly growth figures. The figures revealed a surprising slowdown driven by a decline in construction and business investment. The ABS revealed that gross domestic product rose by 0.3% in the September quarter, which was well below the 0.7 per cent rise most economists had expected on average. Economic growth in the 12 months to September fell to 2.7 per cent as a result well short of the 3.1% predicted by economists. The weaker data saw the local unit lose more than half a US cent after the data was released. At lunch the Aussie was buying 84 US cents.

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