Australian Stock Market Report – Midday September 24, 2014

Office workers are reflected as they walk past the Australian Securities Exchange building in central Sydney April 8, 2011. Singapore Exchange Ltd has terminated its $8 billion bid for Australia's ASX Ltd after the Australian government formally rejected the offer on national interest grounds and said changes to the country's financial systems were needed before the bourse could be bought by foreigners. REUTERS/Daniel Munoz (AUSTRALIA - Tags: BUSINESS POLITICS)

ASX 200 wilts

 The most pressing question for market participants ahead of Wednesday's trading session was whether the ASX 200 could sustain the gains that were made a day earlier. To the disappointment of optimists, the answer was one offer almost immediately. Sellers pushed the index down 10 points at the first trade. The market was down 25 points before there were any visible signs that buyers were making some form of effort. At the lows of the morning the index had shed just over 52 points. Thereafter a small recovery was seen, although then general tone that followed was one of caution.

 Every sector measured by the ASX was in the red over the course of the morning. Materials stocks were amongst the least sold groups, although a general attitude of wariness continues to sum up the attitude of investors. One of the main factors at play in relation to commodity related stocks is the continued strength of the US dollar as investors anticipate a rate rise from the Fed. Commodities are priced in US dollars and as the currency rises, prices become less attractive to buyers in other currencies. In the last 24 hours, base metal prices were mostly higher with the exception of Aluminium Which fell 0.5%, whilst Zinc led the gains lifting by 0.8%. Gold prices rose in the range of 0.3%. Iron ore fell by US40c or 0.5% to US$79.40 a tonne. These movements, however, were overshadowed by manufacturing figures from Europe and the US, which were less than convincing and cast doubt over the momentum of global growth at present. Heavily shorted Fortescue Metals Group was one of the best improvers in the resource sector with a gain of just over 1%

 Property and bank stocks were in focus this morning after the RBA's semi-annual Financial Stability Review highlighted discussions with APRA, the country's prudential regulator. The two groups have canvassed the possible introduction of measures aimed at moderating investor-led house-price increases that have been hallmark of the last 12 months. The conversation took in the possibility of "additional steps that might be taken to reinforce sound lending practices, particularly for lending to investors." The RBA is alert to the fact that mortgage lending had become "unbalanced" in favor of investors, an outcome which is compromising the prospects for owner-occupiers, particularly first home buyers. Left unchecked the current trend brings with it risks to lenders and the economy at large which was described by the RBA's observation that "The direct risk to financial institutions would increase if these high rates of lending growth persist, or increase further." Banks were amongst the leading decliner in late morning trade.

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