Australian Stock Market Report –Afternoon 6/11/13

AFTERNOON REPORT

The local index was a conspicuous improver in the region on Tuesday for the fact that almost all other bourses ended lower. Investors dodged a bullet at the weekend with the release of some reasonable US jobs data. The figures were able to reassure the markets that the US economy is still creating jobs at a reasonable pace without escalating concerns about the Feds QE retreat.

Regional markets however were labouring beneath the weight of the latest data dump out of China which left participants underwhelmed. Chinese Industrial production in May grew at an annualised pace of 9.2%, which missed the markets estimate of 9.4%. The annualised rate of inflation was 2.1%, compared to expectations of 2.6% and the 2.4% rate seen last month. Retail sales rose 12.5%, again missing the forecast of 12.9%. All in all the markets saw the data as yet more evidence that the Chinese growth pulse continues to moderate, which was one of the factors creating headwinds for the resource sector

Locally the latest reading on Business confidence and housing finance reaffirmed the modest impact that low interest rates are having on business and household behaviour. As a consequence the local unemployment report on Thursday looms as a potential market moving event on Thursday. The risk is that this figure will yield a negative number to balance the outsized increase seen last month. This will incite greater speculation about another near term cut from the RBA and put further pressure on the local currency which has shown few signs of consolidation after big falls.

Corporate news was scant today although one of the talking points was the ASX. The group plans to raise 553 million Australian dollars in a share issue that will help the upgrade of technology and erase its debt, potentially boosting the chances of a foreign tie-up. The ASX said it would issue new shares at 30 Australian dollars each, a 16% discount to their last traded price of A$35.84. The equity raising will allow ASX to pay off loans worth $250 million, rendering the company debt-free and making it more attractive to potential overseas buyers, while improving its capability to fund acquisitions. A further $200 million will be used to upgrade the ASX´s futures-clearing systems to comply with what are expected to be tougher global regulations.

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