Australian Stock Market Report – Midday 9/18/2012

LUNCHTIME REPORT
(11.45am AEST)

Local stocks have retreated today, as the euphoric effects of the US Federal Reserve's latest efforts to stimulate the global economy start to wear off. Overnight US and European markets eased, while oil and gold prices also fell. In the early session, the All Ordinaries Index (XAO) is down 9.8pts or 0.2pct to 4412.

Iron ore miner Fortescue Metals Group (FMG) has resumed trade, after securing a US$4.5 billion credit facility which it will use to refinance its bank debts. FMG shares were placed in a trading halt at $2.99 on Friday, after plunging by 14pct during Thursday's trade. Today's lifeline and a rally in the iron ore price to US$105/tonne has seen FMG rise by as much as 17pct in early trade to $3.50. FMG CEO Andrew Forrest also remains confident the iron ore price will rally back towards US$120/tonne.

Elsewhere, the other big mining companies BHP Billiton (BHP) and Rio Tinto (RIO), are trading in the red following a slump on London's base metals exchange overnight. BHP is down 1.1pct to $33/78 while RIO is off 1.3pct to $56.75.

Energy stocks are also losing ground. The oil price dropped 2.4pct overnight to US$96.62 a barrel. Oilsearch (OSH) has falledn by 3.2pct to $7.61 while Santos (STO) is down 1.4pct to $11.85.

Financial stocks also remain subdued, with the S&P/ASX 200 Financial sector off 0.3pct. Shares in Macquarie Group (MQG) have fallen 1.5pct to $29.02.

Defensive and cyclical players look good, with Telstra (TLS) firmer by 0.5pct to $3.81 and CSL Limited (CSL) up 1.8pct to $43.01.
The Australian dollar has been following commodity prices lower. Speculation of an October rate cut is also keeping the Aussie dollar subdued, with the AUD worth US104.59c after hitting 106 on weekend. The Aussie is also worth £0.644 and €79.86c.

Minutes from the Reserve Bank's September board meeting have just been released, with the RBA citing recent data points to a weakening in the global economic outlook. The RBA also reported that it has seen no significant price effect from the introduction of the carbon tax so far.

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