Australian Stock Market Report – Afternoon 5/9/14

EVENING REPORT
(4.30pm AEST)

Despite a 0.75 per cent slump this morning, the Australian sharemarket managed to steadily improve to only finish 0.25 per cent weaker by the close of trade. ANZ Banking Group (ANZ) was the biggest loser as the major bank traded ex-dividend. Its 3.2 per cent slump wiped out 10pts from the All Ordinaries Index. The other majors managed to improve modestly.

The miners ended mixed, with BHP Billiton (BHP) and Rio Tinto (RIO) both closing around 0.8 per cent softer. JB Hi-Fi (JBH) was a standout; rising by 2.8 per cent thanks to announcing a $27m buyback of its shares to strengthen its balance sheet. Most other retailers weren't as fortunate with Harvey Norman (HVN) down 1.5 per cent. Building company Leighton Holdings (LEI) surged by 6.8 per cent and was a standout performer.

The Reserve Bank issued its latest Statement on Monetary Policy today, which included updates on the central bank's forecasts. The central bank has slightly upgraded its economic growth expectations to 3 per cent by June 2014. Its inflation expectations have been slightly lowered. These are signs that the RBA is feeling more comfortable with the way the Australian economy is improving but also that it isn't as concerned with inflation. The market is currently factoring in a 2 per cent chance of a rate cut next month. An interest rate hike in the latter part of this year is still a possibility; however the RBA doesn't seem in any hurry to raise rates. China released both its consumer and business inflation data today, with neither a concern. CPI (consumer inflation) rose by 1.8 per cent over the past year; 0.3 per cent lower than consensus. PPI (business inflation) has fallen by 2 per cent over the year; 0.2 per cent lower than expected. This is a sign that Chinese officials have the scope to stimulate the economy if needed.

The Australian dollar buys US93.6c and is a full cent firmer than this time last week. A weaker U.S. dollar, strong employment growth and improving Chinese trade figures are all helping. Tonight is likely to be a quiet session on the economic front, with wholesale sales and inventories out for March in the U.S. This tends to have a negligible impact on sharemarkets. No major market moving European data is due for release.

Next week in Australia, credit and debit card lending data will be issued, together with the results of a business confidence survey and the federal budget on Tuesday.