Australian Stock Market Report – Afternoon 4/1/14

Afternoon Market Report
(16:30 AEDT)

Buyers made a push in the second half of the trading day which saw the ASX 200 pull up short of closing in positive territory. The index however was able to finish at the best levels of afternoon trade. The main buying initiative pushing the index higher in the afternoon was found in the resource sector. The bulk miners, which were painting an unconvincing picture in early trade, moved ahead with more conviction in the afternoon.

Reports surfaced in the early part of the afternoon suggesting that BHP was considering asset sales that lifted the tone of the sector. Responding to the market speculation BHP made a statement saying 'We continue to actively study the next phase of simplification, including structural options, but will only pursue options that maximise value for BHP Billiton shareholders'. Notwithstanding the opaque nature of the response shares in the miner rose from being within sight of session lows to close at $3705 a gain of $0.5 or 1.6 per cent.

The main development of the afternoon was the RBA decision on interest rates. There were no surprises; the RBA retained its forward guidance that ´´the most prudent course is likely to be a period of stability in interest rates´´. The RBA appears to have finished talking the AUD lower because of potential inflationary concerns. It was perhaps surprising that the RBA didn't mention the rapid pace of house price growth.

RP Data-Rismark reported that Australian dwelling prices posted a solid rise, improving by 2.3% in March following a flat outcome in February. The monthly lift in dwelling prices took annual growth to over 10%. Over the month, house prices rose by 3.0% while unit prices grew by 2.0%. Prices are now 15.8% above the May 2012 trough and exceeded the previous peak in October 2010 by 7.2%.

The Aussie dollar saw a choppy session. The official China PMI released in the early afternoon was slightly above expectations, which pushed the currency higher. The HSBC China PMI released thereafter printed slightly below expectations which saw the local unit retreat. At the close of local trade the local unit was almost a quarter of a cent below the levels seen at the release of the RBA decision at $US 0.9260