Australian Stock Market Report – Afternoon 10/18/13

Afternoon Report
(17:00 AEDT)

At the end of a week that started with so much uncertainty the local market has gained ground for a for a fourth day. The ASX 200 traversed new five-year highs on Friday and gained 1.7% for the week.

Heading into Friday there was one remaining obstacle for investors to surmount in week that was fraught with hurdles; a batch of Chinese data.

The figures revealed that the world's second largest economy continues to make headway. The Chinese economy grew at 7.8 per cent annual pace in the September quarter which was in line with forecasts, and up from 7.5 per cent in the year to June. The economy grew by 2.2 per cent (8.8 per cent annualised) in the September quarter; up from 1.7 per cent in the June quarter and the fastest growth since June quarter 2012.

Chinese industrial production rose at a 10.2 per cent annual rate in September, down from 10.4 per cent in August (which was the strongest growth in 17 months).Retail sales rose at a 13.3 per cent annual rate in September, down from 13.4 per cent in the year to August (which was the strongest growth in eight months).

So the week just passed has seen 2 important issues resolved. The market has concluded in the last 24 hours that there remains sufficient uncertainty in the US picture, (be it political or economic) for the Fed to maintain its support for Q.E. Today's data consolidates the view that the Chinese economy is improving. Together these 2 outcomes represent a significant positive catalyst as far as the near term is concerned.

The continuing strength in China is starting to be felt in commodity markets and iron ore remains above $130 per tonne. If this trend continues Australia's transition from mining investment to mining production will be smoother than initially feared.

The recovery in the price of gold has been a feature of the last 24 hour (it's gained as much as 4% in that time). As a result miner of the yellow metal had the wind at their backs. Newcrest Mining (NCM) rose 5.3%, Regis Resources (RRL) gained 5.5%, and Resolute Mining (RSG) ended 7.4% higher.

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