Australian Stock Market Report – Afternoon 4-16-13

Afternoon Market Report
(17:00 AEST)

Falling commodity prices continued to be the the main theme driving markets on Tuesday. Gold remains a high profile casualty having fall by 15%in the last week. 10% of that decline has taken place in the last 24 hours, although in recent Asian trade prices of the yellow metal have consolidated.

Several factors have conspired to undermine gold prices, including concerns over the imminent liquidation of gold reserves in peripheral European countries to raise funds. Additionally weaker inflation prospects undermined the argument for gold as an inflation hedge.

Gold stocks showed little evidence of consolidation after heavy falls yesterday. NCM fell 5%, Kingsgate lost 5.40%, Resolute Mining fell by 5.3%, Santa Barbara fell 6.1%, Alacer Gold lost 10.7%

The release of the minutes from the RBA's policy setting meeting yielded no surprises. The central bank retains the view that there is room to cut rates if required. Although the bank's board continue to express confidence that recent rate cuts continue to help non-mining , business and dwelling investment, which they see as being on the mend. The bottom line remains; there will be no rate cuts unless a significant catalyst emerges.

The question is whether the recent run of disappointing global data, led by the US are enough to influence the RBA's course?The weaker Chinese data released on Monday continued to weigh on resource stocks. Although one of the positives for the Chinese economy is moderating inflation, which gives the authorities more room to stimulate growth if needed.

Local economic news included the latest figures on lending finance. Total new lending commitments (housing, personal, commercial and lease finance) have been somewhat erratic for the last half a year. Total lending finance rose by 1.4 per cent in February although it had fallen by 0.6 per cent over the five month period. Lending is up 6.5 per cent on a year ago. The figures re-inforce the view in some quarters that lower rates are required to stimulate more demand for credit

Rio Tinto released quarterly production numbers late in the afternoon. The market was keen to get some more color in relation to the The Bingham Canyon incident last week. The early prognosis for lowered copper production wasn´t as aggressive as the market had expected. However the damage sustained as a result of the mine collapse means that there will be the inevitable increase in capital expenditure. Iron ore shipments delivered a record for the first quarter and the miner indicated that full production had resumed following the cyclones that marked the early part of the year.

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