Australian Stock Market Report – Afternoon 5/14/13

Commsec Afternoon Report

(17:00 AEST)

For a second day local stocks ended higher with a small yet unconvincing gain. Whilst the Federal Budget dominates the national media discussion at present, the reality is that the impact on prices will likely be modest if at all.

One theme that continues to develop for markets in general is the resurgence of the US dollar. The last 24 hours has seen the markets revisit the idea that the US Federal Reserve is drawing up a strategy to exit its QE program. This issue is the primary factor driving currency markets at present. Specifically, it's the reason for the Aussie dollar continuing to appear fragile below parity with the Greenback. Despite the discounted level of the local unit, there has been little evidence that foreign investors are taking advantage to enter the local index.

Mining and energy stocks remained at odds with the strength seen in past weeks. Once again the US dollar figures in this equation. The strength of the US currency is casting a pall over commodity prices and in turn over mining and energy stocks.

One of the bright spots in Tuesday's session was the release of lending finance data. Figures showed that the total value of new lending commitments (housing, personal, commercial and lease finance) rose by 2.5 per cent in March after rising by 1.5 per cent in February. Lending is up 0.7 per cent on a year ago. The figures provide evidence that the low interest environment is getting some traction with borrowers. The data had a marginal impact the big four banks, the CBA was only group to end higher.

In corporate news the mining services sector received some uncharacteristic good news. Macmahon Holdings said they were on track to meet earnings guidance and are on a surer footing following the sell down of its construction unit to Leighton Holdings. Macmahon shares ended 25.7% higher.

There is no US data tonight. In Europe the main interest today will be the German ZEW survey for May, the first of the top tier sentiment readings for this month. A modest decline is expected , although the levels should indicate modest growth in Europe's largest economy.

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