Australian Stock Market Report – Afternoon 1/10/14

Afternoon Market Report
(16:30 AEDT)

To use some nautical imagery, the ASX 200 on Friday was a sail boat in search of a breeze to fill its sails. As such moving air was hard to come by; this was reflected in some of the slightest volumes of the week early in th session.

Insights have been scarce under these circumstances, although there were some to be gleaned. One example has been the willingness of buyers to defend the 5300 level in terms of the ASX 200. This level was challenged yesterday, and consequently the sellers paid deference to it on Friday. The caveat of course being that it all happened on volumes that amounted to a trickle, but at face value the result suggests that these levels won't be given up easily.

Mining stocks remained out of favour on Friday. This has been one of the more visible themes in recent days. Weaker metals prices informed the tone on Friday after subdued readings on Chinese producer and consumer inflation in the last day. Markets are taking the view that the absence of Chinese inflationary pressures and the rolling back of the Fed's Q.E program are factors working against commodity prices in the near term

This week's economic readings have on balance been positive for the atmospherics around banks. Today' figures from the Housing Industry Association showed that new home sales lifted by 7.5 per cent in November, the fastest monthly growth rate in four years. New home sales are up 29.2 per cent on a year ago. Financials were firmer on Friday, although it was the regional banks that tended to stand out, Bendigo Bank (BEN) rose 0.3%, and Bank of Queensland ended higher by 0.57%.

Forge Group (FGE) went into a trading halt ahead of an update on its financial position. This will remain in place until the earlier of the announcement being made or the commencement of trade next Tuesday January 14. FGE recently announced that Black Rock Group had taken a stake in the mining services company having been awarded new contracts at The Roy Hill iron ore mine in Western Australia. FGE shares last traded at $1.25

Tonight in the US; non farm payrolls are expected to come in around 197K for the last month.The strength of earlier employment data this week suggests upside risk to December payrolls. The unemployment rate looks like it will remain at 7.0%. The US labour market will be central to the Fed's tapering decisions this year.

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