Australian Stock Market Report – Midday November 28, 2014

A man works at the West Qurna oilfield in southern Basra October 13, 2014. Reuters/Essam Al-Sudani

 Australian shares are posting their biggest daily losses in a month and a half following a huge slide in oil prices overnight. The ASX 200 Index is down 1.3 per cent and is being led lower by an energy sector slumping by close to 7 per cent at lunch.

 Overnight, US markets were closed to observe the Thanksgiving holiday. The S&P500 is up by around 0.5 per cent so far this week.

 Energy stocks are down by 6.9 per cent following OPEC deciding to not reduce the amount of oil it pumps which means lower prices for longer. Oil is at its cheapest level since May 2010 due to plenty of supply and sluggish demand. Woodside Petroleum (WPL) is down 6 per cent while oil and gas producer Santos (STO) is slumping by 10.1 per cent. OPEC accounts for around 40 per cent of the world's oil output each year.

 Mining shares are mixed however BHP Billiton (BHP) is slumping by 3.5 per cent. The world's largest miner generates around 20 per cent of its earnings from the production of petroleum products. The iron ore focused Rio Tinto (RIO) is up 1.1 per cent while Fortescue Metals (FMG) is up by 1 per cent.

 Airlines are strong improvers with Virgin Australia (VAH) up 1.2 per cent while the larger Qantas (QAN) is up 5.5 per cent. QAN spent around $4.5bn on underlying fuel costs last year; a $253m rise on the previous year.

 Volume is significantly greater than usual following heavy trading in the energy sector and options expiry yesterday. 777m shares have changed hands worth $3.5bn. 245 stocks are up, 509 are down and 306 are unchanged. Yesterday $4.2bn worth of shares were traded by the end of the day.

 Economic news is light locally while Australia's second largest trading partner Japan has issued plenty of data. Household spending has slumped by a less than expected 4 per cent in Japan over the past year; inflation is up 2.9 per cent as forecast while unemployment has improved from 3.6 per cent to 3.5 per cent last month.

 US markets will be trading half day tonight following the Thanksgiving holiday observed yesterday. In focus this evening will be an update on Europe's jobless rate and the Black Friday sales in the US which is a useful gauge of retail spending across the world's largest economy.

 The Australian dollar has fallen to US$0.851, €0.683, ¥100.6 and £0.541 following the slump in oil prices.

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