Australian Stock Market Report – Afternoon 1/21/14

Afternoon Market Report
(16:30 AEDT)

Over the period of recent weeks the local market has cultivated the appearance of resilience. Appearance, because these kind statements have to be seen through the lens of summer volumes, which can make for some rather flighty price action. In the support of the claim, last week saw the market recover from a 2% deficit to end the week flat. Today the market was down almost 20 points before a mid-session recovery saw the market end the day ahead by 30 points.

One of the factors that helped the turnaround was the Shanghai Composite Index. Chinese stocks moved ahead after the PBoC added liquidity to money markets relieving pressure on short term interest rates. Most markets in the region got a bump higher as a result.

The noteworthy aspect of today's session locally was the under-performance of the miners. Recent strength has been a legacy of encouraging news from FMG and RIO last week. BHP Billiton announced a final agreement to pay $A3.42 million to Otto Energy which will pave the way for its withdrawing from an exploration joint venture in the Philippines. Additionally investors are looking forward to BHP production numbers due on Wednesday.

Today's early selling was informed by softer iron ore prices which fell 2.0% in the last day to USD124.80/t (CFR China) with Chinese steel mills citing a weaker steel market and tighter credit conditions. Junior miners of the ore were under pressure, Atlas Iron (AGO) fell almost 4.1%.

The opposite of the coin saw banks well supported today. The majors finished the day ahead by a margin of around 1%. Consumer confidence figures released tomorrow will provide some valuable context for consumer perceptions towards spending and borrowing.

Diversified industrial group GUD Holdings (GUD) kicked off the start to the reporting season today. The group reported an underlying net profit after tax for the six months to the end of December of $14.9 million, down 31 per cent from the previous corresponding period. The result was hampered by restructuring costs at the groups Sunbeam and Dexion operations. An interim dividend of 18 cents per share fully franked will be paid on March 6. GUD shrea ended ahead by 0.35 per cent.

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