Australian Stock Market Report – Afternoon 10/29/13

Afternoon Market Report
(17:00 AEST)

Sellers continued to hold sway over the 2nd half of Tuesday's session. The weakness seen in the morning refocussed on the bank stocks which were outperforming in a falling market in early trade.

Tomorrow's FOMC meeting will be the dominant influence on global markets this week. Ahead of this key outcome it was it was reasonable to see the market ease somewhat, particularly given that it was moving towards the 5500 level in terms of the ASX200. The risk for the market turns around perception of Q.E. Markets have concluded in the absence of any official communication from the central bank that the Fed is on the sidelines when it comes to tapering Q.E. Any comment later in the week that cast doubt on this notion will see sellers return with some force.

Resource stocks remained weak in the afternoon. Central to the fortunes for mining stocks this week will be the official Chinese manufacturing PMI released on Friday which should offer a degree of AUD support and lend support to material stocks. Further improvement is expected and this should provide further evidence that momentum in the Chinese economy is picking up into year-end.

Another day, another instalment in the quest to acquire WCB. Japan´s Kirin Holdings Ltd's food and beverage unit, Lion, has bought a 10 per cent stake in Warrnambool Cheese and Butter Factory (WCB). The move is an effort to stymie Saputo's attempt to buy the Victorian dairy interest. WCB makes Coon cheese which Lion sells in south-east Asia. Bega Cheese (BGA) and Murray Goulburn Co-operative each have a 35 per cent stake in WCB which rose more than 5% today having been up as much as 11%

Markets reacted to speech from RBA governor Glenn Stevens today who gave clear views on the state of housing and the AUD.

On housing, he was simultaneously relaxed about the current situation, but concerned about the future The Governor two concerns. First, that credit growth may increase in coming quarters. Second, that certain pockets of housing were growing rapidly On the AUD he was perhaps even more blunt: "So it seems quite likely that the at some point in the future the Australian Dollar will be materially lower than it is today". The overall market reaction seems to have focused more on the indication from the Governor that he was relaxed about the current situation.

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