Australian Stock Market Report – Afternoon 5/15/13

Afternoon Market Report.

(17:00 AEST)

Sellers got the upper hand in the post Federal Budget session on Wednesday. The weaker tone was primarily derived from big picture matters driving global markets at present, rather than a response to the budget. Some have associated the drop in the Aussie dollar in the last day to the larger than expected deficit in the budget. However the resurgence of the Greenback, that continued in the last 24 hours, remains the main catalyst for the declining the local unit. The other repercussion of Dollar strength is the outlook for commodities. As a consequence the fear of weaker commodity prices was the main driver of today's decline. Solid declines for BHP, RIO and FMG made up for about half of the losses for the ASX200.

Compounding the negativity towards resources was concern over the profit outlook in the mining services space. Leading the Charge was UGL limited. The engineering group offered a common refrain when downgrading its fill year earnings guidance. The group expects NPAT to be in a range of $90-100 million , compared to an earlier prediction of $150 to 160 million. UGL has blamed the pullback in investment rates and the newly found austerity on the part of major miners for the lowered guidance. The markets was underwhelmed by the news given that earnings were written down only 3 months ago. The displeasure of investors was evident in the 17% decline for the stock.

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