Australian Stock Market Report – Midday 5/15/13

MID-SESSION REPORT

(12.30pm AEST)

Despite a stronger start to the session, the Australian market is slipping for the first time in six sessions. The All Ordinaries Index (XAO) is down 0.8 per cent or 44.1 pts to 5,158.4. Investors initially reacted to healthy gains from global sharemarkets overnight rather than Tuesday's federal budget, however the rise was short lived with most sectors turning negative about one hour into the session.

The mining sector continues to be the biggest drag, with the S&P/ASX 200 Materials index down 2.6 per cent. Comments by BHP Billiton's (BHP) new Chief Executive, Andrew Mackenzie which outlined plans to slash capital expenditure (CAPEX) isn't doing the sector any favours. BHP is down 2.74 per cent, Rio Tinto (RIO) is 4.1 per cent lower while iron ore player, Fortescue Metals (FMG) is 3.4 per cent weaker.

The major banks were higher this morning, however three of the big four are down by as much as 0.72 per cent at lunch. Commonwealth Bank (CBA) issued its March quarter update to the market and is the only major to be modestly higher. CBA is up 0.07 per cent.
Construction company, Leighton Holdings (LEI) is down 4.73 per cent or 92 cents to $18.54 after receiving a profit warning. LEI has slumped by 7.8 per cent so far this week, completely wiping out last week's 5.8 per cent improvement.

Australia's second biggest telco, Optus has announced a 7.5 per cent slide in full-year profit to $728 million. The larger Telstra (TLS), the sixth biggest Aussie company is down 0.2 per cent, taking the gains to 14.4 per cent for this calendar year.

On the economic front, the latest quarterly wage price index showed a modest rise in wages of just 0.7 per cent. Wages play an important part of inflation. If businesses are paying more to their employees, the higher costs tend to be passed on to consumers. Keeping inflation under control is one of the main responsibilities of the Reserve Bank of Australia (RBA).

A report on car sales out this morning showed that there was a 1.6 per cent slide in new car sales in April. New car sales are up by around 7.6 per cent over the year.

The Australian dollar has slipped a little further today and buys just US98.9 cents, the lowest level since June 2012.

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