Australian Stock Market Report – Midday 7/11/2012

MIDDAY REPORT
(12pm AEST)

The Australian sharemarket is losing ground for the fifth straight day, with the All Ordinaries Index (XAO) down 0.2 pct or 9.9 pts to 4128. Despite the falls, the last week and a half has been extremely quiet on markets, so the losses cannot be taken too seriously.

On a positive note, a report has shown that Australians are more confident about their finances this month than expected. The recent rate cuts and lower fuel prices seem to be boosting sentiment. The official cash rate (the interest rate set by the Reserve Bank of Australia) is 1.25 pct lower than at this time last year at just 3.5 pct.

The change in the number of new home loans granted for owner-occupied homes in May fell by 1.2 pct, which was worse than market expectations however.

The big four banks are mixed and have started improving over the past 30 minutes or so. Westpac (WBC) is the best of the majors and is up 1.11 pct or 23 cents to $21.79. Commonwealth Bank (CBA) is 0.4 pct or 21 cents higher to $53.63 and National Australia Bank (NAB) is 0.08 pct or 2 cents higher to $23.57.

Stocks with a relationship to commodities are struggling at lunch. The S&P/ASX 200 Energy index (a measure of the performance of the largest oil and gas producers) is down 0.89 pct or 105.3 pts to 11688.7. The S&P/ASX 200 Materials index (a measure of the performance of the biggest mining stocks) is easing by 0.53 pct or 50 pts to 9298.8. These two sectors combined account for around 30 pct of the Australian sharemarket.

The largest company on the Australian sharemarket, BHP Billiton (BHP) is down 0.7 pct or 22 cents to $31.00 while the smaller Rio Tinto (RIO) is 1.25 pct or 70 cents lower to $55.40.

Last night, American markets fell for the fourth straight session, partly due to profit warnings by a number of American companies. It is currently the profit reporting season for the second quarter in the U.S (April to June 2012). For each business saying it expects profit to improve over the next couple of quarters, there are more than three companies expecting worsening conditions in the world's largest economy.

European shares rose for the first time in five trading days however. The European leaders said they would make €30 billion available to the Spain by the end of the month and also are giving the Spanish government an extra year to get its finances into order. This was part of the reason why borrowing costs (bond yields) for some Eurozone economies eased overnight.

So far in the 2012 calendar year, shares in Australia are up by around 0.25 pct, U.S markets are around 4 pct higher, shares in Germany are approximately 8 pct stronger while Japanese shares are up around 6 pct.

Following the end of daylight savings, major Asian markets will be trading between the hours mentioned below until October this year.

The Hong Kong sharemarket trades in two sessions each day and will now open for trade between 11.30am (AEST) and 2pm (AEST) while the second session is between 3.30pm (AEST) and 6pm (AEST).

Out of Japan, the first session will be between 11am (AEST) and 1pm (AEST) while the second session is between 2.30pm (AEST) and 5pm (AEST).

The Singapore exchange will be open for trade between 11am and 2.30pm (AEST) for the first session and then between 4pm and 7pm (AEST) for the second.

So far in trade at lunch, 642 million shares have been traded worth $1.46 billion. 297 shares are up, 401 are lower and 285 are currently unchanged.

The Australian dollar (AUD) is buying US102 cents, €83.2 cents and £65.7 pence. This seems to be a great time to travel to Europe, with the AUD trading around an all-time high against the Euro. To put this into perspective, for every AU$100 of spending money, you are about €30 better off now than when the Euro started its circulation back in 2002. Make sure you bring back a miniature Eiffel Tower for me if you head to France!

The AUD is the world's fifth most traded currency behind the U.S dollar, the Euro, Japanese Yen and British Pound. The AUD accounts for around 7 pct of all foreign exchange trades. Despite the stronger AUD, tomorrow's expected rate cut could put our dollar under pressure.

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