Australian Stock Market Report – Afternoon 2/4/14

EVENING REPORT
(5pm AEDT)

The Australian sharemarket slumped by 1.7 per cent, having its worst day in seven months and closing at a 1.5 month low. All sectors finished in the red following a 2 per cent slump in U.S. equities fuelled by disappointing manufacturing data.

The Lunar New Year holidays are continuing, with markets in China, Taiwan and Vietnam shutting their doors today. Despite the holidays, volumes were surprisingly healthy, with around $6 billion worth of shares changing hands. The biggest event of the week is yet to come however; the non-farm payrolls (U.S. jobs report) for December will be issued on Friday night and has the potential to set the tone for global markets next week.

The Reserve Bank of Australia (RBA) pulled no surprise punches, deciding to keep interest rates on hold at 2.5 per cent for the sixth straight month. Australia's central bank made it clear that it is likely to keep interest rates steady for the time being. The final sentence of the RBA's statement today was "On present indications, the most prudent course is likely to be a period of stability in interest rates. " This signals the RBA's intention to not touch monetary policy for now. This pushed local stocks lower this afternoon and helped lift the Australian dollar to a two week high of US88.8 cents.

The profit reporting season continues with online advertising business REA Group (REA) and engineering firm Downer EDI (DOW) out with half year profit results. REA Group (REA) reported a better than expected 37% lift in its first half profit to $70.7 million. REA is the company behind property websites such as realestate.com.au and property.com.au. The result was driven by a shift in focus from a subscription model for Real Estate Agents to a fee per listing. It is estimated that REA charges roughly (depending on type of ad) between $100-$3500/month for each ad. Its property advertising websites have been generating 22.5m monthly visits (2.7 times more than its nearest competitor). No guidance was provided. Investors have reacted well to the result, pushing REA shares higher and adding to last year's 109% surge.

Tonight is set to be quiet on the economic front tonight. Spanish unemployment data and U.S chain store sales are out. Tomorrow, markets in China and Vietnam will be closed. Echo and Challenger issue earnings on Wednesday.

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