Australian Stock Market Report – Afternoon 5/22/13

Afternoon Market Report

(17:00 AEDT)

With the exception of the first half hour of trade, sellers dominated the session on Wednesday. The news pulse in corporate and economic terms provided further encouragement.

Financials were the main weight on the index today. Not helping the atmosphere around the lenders were figures showing a bigger than expected decline in consumer confidence. According to Westpac and The Melbourne Institute, confidence fell by 7% in May. There were several noteworthy points in the survey, amongst them; the May decline was the biggest in 17 months and the index fell below 100 for the first time since October 2012. Whilst confidence fell across the country on a state by state basis, what stood out was the strength of sentiment in relation to purchasing a dwelling. For example, in WA confidence fell 11% although the measure of whether it was a good time to buy a dwelling rise by a substantial 22%. The same measure increased by more than 13% in NSW, 11% in SA and more than 8% in QLD. Encouragingly, attitudes to buying property are being helped by low rates and the recent rate cut from the RBA. The big four banks were all lower by the order of 1% despite improving sentiment towards purchasing property.

Profit downgrades have been a feature of the retail space in recent weeks. Evidence on a number of fronts has been suggestive of a tightening of household spending in general. Today's anecdote supporting this view was provided by weaker than expected quarterly sales numbers from Myer (MYR) whose shares lost 3.2%

TEN Network shares continued their retreat losing almost 2% today having shed 8% yesterday. Market speculation has turned around the possibility that a stakeholder has been looking to sell down their interest in the broadcaster.

All eyes will turn to Washington later this morning local time (after 12:30am AEST) for Fed Chairman Bernanke's testimony to the Joint Economic Committee on the US economic outlook. While he is expected to acknowledge that the economy and labour market are improving, we do not expect any meaningful shift away from the current official FOMC line in relation to continued open ended QE.

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