Australian Stock Market Report – Midday December 9, 2014

IN PHOTO: Office workers are reflected as they walk past the Australian Securities Exchange building in central Sydney April 8, 2011. Singapore Exchange Ltd has terminated its $8 billion bid for Australia's ASX Ltd after the Australian government formally rejected the offer on national interest grounds and said changes to the country's financial systems were needed before the bourse could be bought by foreigners. REUTERS/Daniel Munoz

 Australian shares are wiping out all of yesterday's gains with the ASX 200 Index down by 1 per cent. This should come as no surprise following a 4 per cent slump in the oil price, disappointing economic news in China and Japan on Monday, the worst performance for US shares since October overnight and a credit downgrade for Italy.

 Mining and energy stocks are the worst performers at lunch with oil and gas companies down 4 per cent and mining stocks slumping by 2.1 per cent.

 Australia' third largest listed company BHP Billiton (BHP) is down around 2.9 per cent and is wiping out 9.5pts from the ASX 200; accounting for around 20 per cent of the market's drop. This is approximately the same impact that the whole energy industry is having on the broader market.

 Qantas (QAN) is up 3.8 per cent and is one of the few strong improvers. Yesterday the airline said it will return to profitability this half and is likely to have its best period since 2010. QAN shares have surged by 30 per cent so far in December, gained 14 per cent in November and rose by 20 per cent in October.

 National Australia Bank (NAB) has become the second of the major banks to expect two rate cuts in 2015 (March and August). The bank was previously forecasting rate hikes next year. We currently expect no rate moves until mid-2015. Expectations are dependent on data released on a monthly basis which can change economists' views of the market.

 NAB's business confidence report for November shows a 4pt slump in sentiment to +1 while business conditions fell from +8 to +5. Readings above 0.0 show a level of optimism. The Australian dollar fell following the results.

 Weekly consumer confidence slumped by 3.1 per cent last week according to ANZ/Roy Morgan's Weekly Consumer Confidence survey out this morning.

 Volume at lunch remains normal with 600.4m shares traded worth $1.6bn. 226 stocks are up, 499 are down and 283 are unchanged.

 The Australian dollar is weaker and buys US$0.826, ¥99.9, £0.528 and €0.671.

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