Australian Stock Market Report – Midday June 11, 2014

MID-SESSION REPORT
(12.10pm AEST)

The Australian market is under pressure at lunch, wiping out yesterday's modest gains. The All Ordinaries Index (XAO) is down 0.3 per cent, with weakness from the miners, industrials and energy stocks most substantial. Gains from two of the four major banks are helping minimise today's losses. Markets overnight ended flat, providing an uninspiring lead for local stocks.

Earlier today, results from the monthly consumer sentiment survey were released. Confidence has improved by just 0.2 per cent this month following a 6.8 per cent slump in May. Sentiment has been hurt by the Federal Budget. Most listed retail companies have lost ground over the past few months.

Flight Centre (FLT) is bucking the trend however; despite a downgrade to its own profit expectations for this financial year. The travel agent warned that underlying profit before tax is likely to be at the low to mid-point of previous guidance. FLT has been a standout in recent years on the Australian sharemarket however. Last year FLT shares surged by 73 per cent and shot 67 per cent higher in 2012.

Yesterday, discount retail The Reject Shop (TRS) said it would fall short of its own earnings guidance, which resulted in a 12 per cent slump in its share price on Tuesday. Warm weather and the budget were blamed. TRS is improving by 4.3 per cent today.

The miners continue to be underperformers, with weaker commodity prices and a strong dollar hurting profit margins. BHP Billiton (BHP) is down 0.9 per cent while the smaller Rio Tinto (RIO), which makes most of its profit from the production of iron ore is down 0.8 per cent. The iron ore price has slumped by around 20 per cent in three months.

At lunch, 691.5m shares have been traded worth $1.48bn. 362 stocks are higher, 458 are lower and 355 are unchanged.

Tonight, OPEC meetings are held in Vienna and will be attended by representatives from 13 oil rich nations. OPEC controls around 40 per cent of the world's oil supplies. An update on the UK's unemployment rate will be out this evening while the US issues its Federal Budget statistics for May. A deficit around US$140 billion is expected for the month.

Looking ahead, tomorrow's monthly jobs report in Australia will be this week's highlight. The market is expecting the creation of around 10,000 jobs in May and a jobless rate around 5.8 per cent. The Reserve Bank is unlikely to raise interest rates until it feels comfortable unemployment is close to peaking. Over 100,000 jobs have been created since the start of this calendar year. The data will be out at 11.30am (AEST) tomorrow morning. Friday will be one of the busier days this month for Chinese economic news. Reports on production, retail spending and investment will all be issued Friday afternoon.