Australian Stock Market Report – Midday 8/1/13

MID SESSION REPORT
(12.45pm).

After a volatile night on the US markets our market has followed suit today. The Dow Jones index traded over a range of around 140 points overnight and the ASX has now traded over a 40 point range so far today.
After a strong start, where the All Ordinaries Index (XAO) up over 30points, the market has now moved into the red. The market fall was largely because of the sell out in the banks as rumors start to percolate in the markets of a possible bank deposit insurance levy.

At lunchtime the All Ordinaries Index (XAO) was down 11points.

The S&P/ASX 200 Financials index fell over 1.4% as the big 4 banks lost ground and key insurers Suncorp Group Limited (SUN) and Insurance Australia Group Limited (IAG) also declined over the morning. The Financial Review published speculation that the government is looking to introduce a deposit insurance levy that could be announced as early as Friday morning. If it is released as stated by the paper it would lead to a cut in profits for the banks and inventors. Commonwealth Bank of Australia (CBA) fell by over 2.25% and Westpac Banking Corporation (WBC) lost 1.75%.

Suncorp Group (SUN) released preliminary expectation of its 2H 2013 results and dividend payments after the close of markets yesterday showing an expected slide of 34%. The finance firm informed the markets that it had complete a transaction to sell off a portion of its "bad loans book" to Goldman Sachs at a loss of $630Million. Suncorp now expects to post a net profit for 2013 financial year of between $480 to 500Million. Suncorp also said it would pay a special dividend of $0.20 a share and a 2H 2013 dividend of $0.30 a share. SUN share price under pressure today, even with the lift in payments to shareholders, off 3.67% and IAG off 1.4%.

Toll road operator Transurban Group (TCL) said its annual profit had tripled thanks to a lift in traffic growth from its Aussie toll roads. Net profit for the year hit $171.7Million up from $54.9Million last year.
Fees and tolls did improve in the last half but so did costs but we do not expect any real move in shares as the result was in-line with market expectations. TCL share price up 1.6%

Global packaging supplier Amcor Limited (AMC) today told the market it is looking to break its firm in two (demerge) with both entities still listing in Australia. The company is looking to improve growth by splitting the business units. Investors like the news with Amcor up over 5% in early trade and still holding a 0.9% gain by lunch.

In economic news the official Chinese PMI index for July lifted to 50.3 points well above market expectations of 49.8 points and this helped reduce the early losses for the Aussie dollar.

Currently the Aussie has fallen to 0.8942USc after hitting a low of 0.8929USc the lowest levels in 3 years overnight. This is good news for the broader economy, exporters, retailers and internal tourist.
The chances of an interest rate cut now being factored in by money markets by the RBA next Tuesday is now 97% The Aussie dollar now at 0.8959USc

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