MIDDAY REPORT (12pm AEDT)
The Australian sharemarket has kicked off the day in the red, with the All Ordinaries Index (XAO) easing by 0.1 per cent or 4.1 pts to 4506. Most sectors are improving modestly; however not sufficiently to tip markets into positive territory. The mining companies are down by 1 per cent, being weighed down most by gold producer, Newcrest Mining (NCM) and iron ore company, Fortescue Metals (FMG).
The S&P/ASX 200 Materials index is down 1.01 per or 102.4 pts to 10010. Australia's biggest miner, BHP Billiton (BHP) is slipping by 0.89 per cent or 30 cents to $33.24 while the smaller Rio Tinto (RIO) is 1.15 per or 65 cents lower to $55.73.
The major banks are mostly stronger, with Westpac (WBC), National Australia Bank (NAB) and ANZ Banking Group (ANZ) all around 0.5 per cent higher. Commonwealth Bank of Australia (CBA) is flat.
Surfwear retailer, Billabong (BBG) slumped by 21 per cent last week after private equity business TPG withdrew its takeover offer for late last week. Today, BBG is down 1.2 per cent or 1 cent to 82.5 cents. BBG has slumped by 41 per cent since the start of January this year, adding to last year's 78 per cent plummet.
On the economic front, there was a much stronger than expected 4.7 per cent rise in the number of cars sold in September. The market was hoping for a 1.5 per cent lift in car sales. The August report on housing finance (home loans) was issued and recorded a 1.8 per cent jump in issued home loans over the month. This was broadly in-line with market expectations. The market is now factoring in an 80 per cent likelihood of an interest rate cut next month. The RBA rarely makes one rate cut without backing it up the very next month with another. Over the past five years the Reserve Bank has made 21 moves on rates and only on three occasions has it made a cut or increase for one month in isolation.
Looking back, last week the Australian sharemarket eased by just 0.08 per cent while American shares fell by 2 per cent. Both the World Bank and the International Monetary Fund (IMF) downgraded global growth forecasts. There were 14,400 jobs created last month while the unemployment rate rose from 5.1 per cent to 5.4 per cent which was a bigger than expected rise.
In Australia this week, Telstra, Newscorp and Cochlear are all scheduled to hold their Annual General Meetings (AGMs). Quarterly reports will be issued by Fortescue Metals (FMG), Rio Tinto (RIO), Woolworths (WOW) and Woodside Petroleum (WPL).
In the U.S, a few hundred companies will be announcing their third quarter earnings (profit) including McDonalds, Google and Microsoft.
In Europe, on Thursday the European Union Economic Summit will kick off and will be closely observed by investors.
U.S futures are currently pointing to a slightly lower start to trade tonight. The U.S market trades between 11.30pm (AEST) and 7am (AEST).
So far in trade at lunch, 908 million shares have been traded worth $1.09 billion. 360 shares are up, 420 are lower and 316 are currently unchanged.
The Australian dollar (AUD) is weaker and buys US102.2 cents, €79.1 cents and £63.7 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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