Australian Stock Market Report – Afternoon 7/16/13

EVENING REPORT
(4.30pm AEST)

It was another quiet day for the Australian market, with only a 3pt rise for the All Ordinaries index (XAO). On a positive note, equities managed to rise for the sixth session, making it the longest winning streak since mid-January for local shares. Since the start of the year, the XAO is up 6.5 per cent while the US Dow is 18 per cent stronger and the stimulus fuelled Nikkei 39.5 per cent higher.

Commodity prices slumped overnight, however this didn't stop the miners ending a touch higher for the first time this week. A quarterly production report from Australia's second biggest miner, Rio Tinto (RIO) pushed its shares up 1.37 per cent late in trade. The iron ore focused miner reiterated its guidance for both iron ore and copper over 2013. Iron ore accounted for around 90 per cent of RIO's total earnings in 2012. Over 120Mt of ore was mined between January and June; a record. Despite challenging weather conditions (unseasonal wet weather) and a conveyer belt issue in WA, RIO recorded improvements in production levels for most of its major commodities. China's growth story remains paramount, with our largest trading partner accounting for around 32 per cent of RIO's total revenue.

Australia's biggest gold miner, Newcrest Mining (NCM), (which has one of the highest production costs of the precious metal producers listed on the local market) slumped by 2.06 per cent today. It has an approximate margin for each ounce of gold of around US$105/ounce. Further falls in gold prices (already down 23 per cent this calendar year) would be detrimental to its profit story. NCM shares are down 49 per cent since January.

The major banks rose by at least 0.2 per cent, with Westpac (WBC) jumping by 1.06 per cent and leading the charge higher.

On the economic front, the Reserve Bank issued the minutes from its July interest rate meeting today. The Australian dollar and market eased following the release. The RBA still is open to cutting rates in the coming months; however next Wednesday's quarterly CPI (consumer inflation) reading will be an important piece of the puzzle. The market is factoring in a 53 per cent chance of a rate cut in August (around 65 per cent likelihood yesterday).

Just 1.3bn shares changed hands today, worth $3.32bn.

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