Australian Stock Market Report – Midday 12/4/2012

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By Steven Daghlian, CommSec Market Analyst | December 4, 2012 1:40 PM EST

MID-SESSION REPORT
(11.40am AEDT)

The Australian sharemarket is a touch lower ahead of the Reserve Bank's interest rate decision this afternoon. The All Ordinaries Index (XAO) is down 0.2 per cent or 10.0 pts to 4530. Most of the market is now trading in the red, with the energy and mining sectors the biggest drags on trade.

Last night, global markets ended mixed; European shares edged a little higher while American equities slid by approximately 0.5 per cent. At around 7am (AEDT), speculation that U.S politicians were getting closer to striking a deal in relation to the fiscal cliff started paring back earlier losses. This was short lived however, with the Republicans making a $2.2 trillion counter offer to the White House which doesn't include an increase in tax rates on higher income earners.

The deal did include an $800b tax reform, $600 billion in healthcare cuts and $600 billion in other savings. Essentially this deal flipped Obama's current deal. The Republicans prefer spending cuts as a viable option for reducing the budget deficit, whereas the Democrats prefer an increase in tax.

The Greek government offered to buy back €10 billion in bonds issued earlier this year. The borrowing cost for its government has fallen to 14.5 per cent, the lowest rate in years. Despite the improvement, the Australian government currently needs to pay around five times less than Greece to borrow funds.

Yesterday, the Australian market kicked off the week higher, rising for the fifth time in six days. Slightly better than expected manufacturing data in China helped lift markets. Retail spending was flat while job ads slumped for the eighth straight month adding to the disappointing economic data issued over the past few weeks.

At 2.30pm (AEDT), the Reserve Bank of Australia (RBA) will make its decision on interest rates. The market is factoring in a 93 per cent chance of a rate cut today to 3 per cent. Rates have already been cut on three occasions this year, down from 4.5 per cent last November. The last time rates were at 3 per cent was back in September 2009. There are ample reasons for a drop in the borrowing rate, from the dollar being too strong to a lack of consumer confidence. Rates haven't fallen below 3 per cent in 49 years.

Australia's biggest miner, BHP Billiton (BHP) is down 0.55 per cent or 19 cents to $34.35 while Rio Tinto (RIO) is up 0.22 per cent or 13 cents to $58.70.

Three of the four major banks are also holding the market back today, with Westpac (WBC) down 0.47 per cent or 12 cents to $25.44. ANZ Banking Group (ANZ) is 0.36 per cent or 9 cents to lower to $24.60, while Commonwealth Bank (CBA) is down 0.13 per cent or 8 cents to $60.74. National Australia bank (NAB) is the exception, with its shares up 0.43 per cent or 10.5 cents to $24.39.

Following the start 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 weaker start to trade tonight. The U.S market trades between 1.30am (AEDT) and 8am (AEDT).

So far in trade at lunch, 504 million shares have been traded worth $1.16 billion. 289 shares are up, 450 are lower and 285 are currently unchanged.

The Australian dollar (AUD) is stronger and buys US104.2 cents, €79.8 cents and £64.7 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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