Australian Stock Market Report – Midday 7/1/13

MID-SESSION REPORT

(12.30pm AEST)

Investors seem to be kicking off the financial year with a sour taste in their mouths. The All Ordinaries Index (XAO) is down by 1.6 per cent at lunch. The banks are the biggest culprits when it comes to the losses, with the big four down by as much as 2.9 per cent.

The miners are mixed, with gold miner Newcrest Mining (NCM) rising strongly thanks to a higher gold price, while BHP Billiton (BHP) and Rio Tinto (RIO) are both down by around 1.2 per cent. NCM was improving by as much as 4.5 per cent earlier in the session, however the excitement has somewhat died down, with its shares up 2.2 per cent.

Plenty of economic news has already been released in Australia and the region today. There was no change in inflation over June, which would be encouraging for the Reserve Bank. The more important quarterly reading on inflation will be issued on 24 July and is likely to demand significant attention later this month. Despite the benign shift in prices recently, the RBA is likely to remain on the interest rate sidelines for at least another month. The market is currently factoring in just a 20 per cent chance of a cut at 2.30pm (AEST) tomorrow.

In the region, two major reports were issued in China this morning, both a little disappointing. At 11am (AEST), the official government reading on the health of China's manufacturing sector came in at 50.1. Despite this being largely in-line with market expectations, it does show that manufacturing isn't going anywhere in a hurry. This was a fall from the previous month's 50.8. At 11.45am (AEST), the HSBC reading on manufacturing fell from 48.3 to 48.2 (a little worse than expected). Any reading below 50.0 indicates industry contraction. The Australian dollar still has been managing to rise however, currently buying US91.7c. Prior to both reports, the dollar was buying US91.3c.

News Corp (NWS) has completed its split in two. NWS looks after its publishing arm while 21st Century Fox, which starts trading under that name tomorrow locally, is its entertainment business.

German company, Hochtief has increased its stake in Australian listed construction company, Leighton Holdings (LEI) to 55 per cent. LEI is up 2.07 per cent.

The start of a new month and financial year is always a busy time for economists. This week, tomorrow's Reserve Bank interest rate meeting will be in focus. Retail spending, trade and building approvals are also of note. In Europe, unemployment is out tonight, while both the Bank of England and European Central Bank will both be making interest rate decisions on Thursday. On Friday, the latest month employment report will be issued and will be the main piece of data markets are waiting for.

At lunch, 565 million shares have changed hands, worth $1.59 billion. 324 stocks are higher, 355 are lower and 265 are unchanged.

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