Australian Stock Market Report – Midday 8/31/2012

MIDDAY REPORT
(11.30am AEST)

The modest gains on the Australian sharemarket were short lived this morning, with the All Ordinaries Index (XAO) now completely flat to 4339.2. Most sectors are improving; however the mining sector is once again one of the biggest drags on trade.

Iron ore prices are at three-year lows, due in part to a drop in demand from our largest trading partner, China. Iron ore focused miner, Rio Tinto (RIO) has been hard hit, falling by almost 18 pct this calendar year. RIO is still up by 1.79 pct or 87 cents to $49.53 today. Iron ore production makes up around 90 pct of the miner's total profit.

Etihad Airways has increased its stake in Virgin Australia (VAH) to 9.5 pct. VAH shares are down 3.09 pct or 1.5 cents to 47 cents however. Keep in mind that VAH has greatly outperformed the broader sharemarket this calendar year, with its shares jumping by 63 pct since January 2012.

Its competitor Qantas (QAN) is edging higher by 0.43 pct or 0.5 cents to $1.16.

The reporting season is now down to just a trickle of businesses issuing profit results. Australia's largest specialty retailer, Harvey Norman (HVN) announced a 31.6 pct slump in its annual profit to $172.5 million. Chairman, Gerry Harvey said that the results were very disappointing with both prices and profit margins coming under enormous pressure. HVN shares are still up 0.95 pct or 2 cents to $2.12

Today is one of the biggest days of the month for Japanese economic data. Its manufacturing sector is still contracting, household spending picked up a little more than expecting, inflation is non-existent and Japan's unemployment rate is unchanged to 4.3 pct.

On the economic front, the latest private sector credit report was issued and recorded a lower than expected 0.2 pct improvement in lending last month.

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.

U.S futures are currently pointing to a slightly stronger start to trade tonight. Dow futures are up 14 pts. The U.S market trades between 11.30pm (AEST) and 7am (AEST).

So far in trade at lunch, 838 million shares have been traded worth $3.42 billion. 287 shares are up, 443 are lower and 301 are currently unchanged.

The Australian dollar (AUD) continues to lose ground and buys just US102.9 cents, €82.2 cents and £65.1 pence.

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.

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