Australian Stock Market Report – Afternoon 5/20/13

Commsec Afternoon Report

(17:00 AEDT)

The afternoon session saw the local index retreat from its best levels of the session when it was seeing gains of more than 1%. The main event of the week sees the US Federal Reserve Chairman, Ben Bernanke delivering a testimony to the Joint Economic Committee in Washington on Wednesday night local time. Whilst the purpose of the Mr Bernanke's chat is to update the politicians on the state of the economy, the key focus will be on Quantitative Easing.

For the last 2 weeks the markets have been jumping at shadows in relation to suggestions that the US central bank is drawing up plans to withdraw from its policy of QE. The markets see this an opportune time to put recent developments into context. CommSec expects the Fed Chairman will acknowledge that the labour market is improving, although we don't expect any meaningful shift away from the current FOMC rhetoric on the economy which should see a continuation of open ended QE.

Currency and commodity markets remain on a hair trigger in anticipation of Mr Bernanke's update. To that end gold prices remained under pressure in Asian trade on Monday having lost ground for 8 consecutive sessions. As a result miners of the yellow metal remained in retreat, particularly the second tier organisations.

Wesfarmers (WES) shares firmed modestly having issued a profit warning for its Target discount store chain on Friday. Leighton Holdings (LEI) said it would fill its board vacancies by the end of June and maintained profit guidance which saw the stock finish 3.6% higher. Duluxgroup (DLX) shares lost their 8 cent dividend today to finish down by 2.2%. Mining services stocks remained under pressure following recent profit downgrades, Boart Longyear lost 1.2%, and Worley Parsons shed 1.2%.

The feature of Tuesday's economic calendar locally will be the RBA releasing minutes from the most recent policy setting meeting. These details will provide some context for the recent rate cut. Additionally the markets will be looking for RBA to justify the view that more rate cuts are in the pipeline.

The trading week starts off in the quietly in Europe with a Bank Holiday in a number of European Centres.

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