Australian Stock Market Report – Midday June 5, 2014

MID-SESSION REPORT
(12pm AEST)

After a flat start this morning, local shares are now firmly in the red following a bigger than expected trade deficit recorded in April. The All Ordinaries Index (XAO) is down for the third day and for the fifth time in six sessions. It has been a busy week so far with the Reserve Bank keeping rates on hold on Tuesday, the Australian economy growing at a faster than expected pace according to a report yesterday and a big jobs report expected in the U.S. tomorrow night.

Despite a flat start, mining and energy stocks together with the utilities are now modestly higher. BHP Billiton (BHP) shares are up 0.1 per cent despite reports it is planning to cut around 100 jobs at its iron ore headquarters in Western Australia. High wages, a falling iron ore price (down 20 per cent in just three months) and a firm dollar are squeezing margins. The smaller Rio Tinto (RIO) and Fortescue Metals (FMG) are also higher, with FMG the standout as it surges by more than 1.5 per cent.

The financials are losing ground for the third day and are certainly the biggest drags on the broader market at lunch. ANZ Banking Group (ANZ) is down 0.7 per cent, Commonwealth Bank (CBA) and Westpac (WBC) are both down around 0.6 per cent while National Bank (NAB) is down closer to 0.3 per cent.

The consumer staples sector is also firmly lower, with the industry slipping by 0.8 cents. Sydney based agribusiness Graincorp (GNC) is down 0.8 per cent as it announced a restructure today which could cost 80 people their jobs.

On the economic front, a $120 million trade deficit was recorded in April; around $400m worse than hoped. Exports fell by 1 per cent while imports rose by 2 per cent. The March surplus of $731 million was revised higher to $902 million however. The deficit has pushed the Australian dollar lower from US92.7 to US92.6c. Keep in mind that despite the most recent deficit, the economy has managed to put together back to back surpluses since the start of this calendar year close to $1 billion per month.

At lunch, 829.2 million shares have been traded, worth $1.74 billion. 382 stocks are higher, 404 are in the red and 334 are unchanged.

Looking ahead, both the European Central Bank and the Bank of England will be meeting tonight at 9.45pm (AEST) and 9pm (AEST) respectively to discuss monetary policy. There are some expectations for a rate cut by the ECB. Retail spending numbers in Europe are also due. Tonight is day two of the G7 meetings held in Brussels. In the U.S, a weekly report on jobless claims will be a highlight. In recent weeks, there have been signs of an improving jobs market.