Australian Stock Market Report – Afternoon 1/30/14

Afternoon Market Report
(17:00 AEDT)

One of the main questions vexing investors in the early part of 2014 has been resolved in the last day. The decision by the US Federal Reserve to taper their monthly asset purchase by an additional $10 billion dollars saw brisk selling in regional equity markets on Thursday. The ASX200 showed little inclination to recover from its initial selloff for much of the day. The final 2 hours of trade saw some support emerge for the market, although it remained well in the red at the close.

One of the factors conspiring against an earlier bounce was a weaker reading for Chinese manufacturing. January data signalled a deterioration of operating conditions in China's manufacturing sector for the first time in six months. The deterioration of the headline PMI largely reflected weaker expansions of both output and new business over the month. Doubts about the near term prospects for Chinese growth weighed on the mining sector as a result.

Fortescue (FMG) underperformed its peers after it refined its production guidance. FMG shipped a record 28 million tonnes of iron ore during the December quarter, an increase of more than 43 per cent compared to a year ago. However this result was over shadowed by weather related factors. Adverse weather outcomes have meant that the miner now expects to ship 127 million tonnes of iron ore during the 2013/14 financial year, which is at the lower end of its earlier guidance. Fortescue said it remains on track to achieve a sustainable production rate of 155 million tonnes per year by the end of the March quarter.

Treasury Wine Estates (TWE) was marked down heavily after a profit warning. Weaker than expected sales in Australia and China have seen the wine maker cuts its full year earnings forecast from between $230 million and $250 million to between $190 million and $210 million for the 2013/14 financial year. First half earnings are seen to be in the range of $41 million to $46 million, compared $73 million last year. TWE shares ended trade down 19%

In the US tonight, the weekly jobless claims data is released together with pending home sales and the advance GDP (economic growth) reading. A stronger than expected reading on GDP in particular could see the markets remain focussed on yet more tapering from the Fed in the near term.

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