Australian Stock Market Report – Afternoon 7/17/13

Commsec Evening Report
(17:00 AEST)

The pattern of trade seen this morning continued over the remainder of the day as investors turned over the possibilities to emerge from Fed Chairman Bernanke's semi-annual testimony to the US Congress later tonight local time.

The materials sector was the best improved group compared to most other sub-indices which ended lower. For a second day investors were in receipt of a solid production report, this time from BHP. The points borne out by Rio Tinto's (RIO) quarterly yesterday and BHP's today, is that the improvements in output in the face of lower costs paint a picture that appears more positive than most observers had predicted . The conclusion being that the strong volumes being generated suggest the ability to compensate for lower prices, for the time being at least.

Wesfarmers (WES) was another group to release production numbers. The group said that prices for their premium coking coal had fallen as steelmakers switch to cheaper, lower quality coal. As a result contract prices are now expected to be 15% lower in the third quarter.

Mineral sand miner Iluka Resources (ILU) said that revenue fell 42% reflecting lower output in the face of falling prices. The company cut production by nearly in half during the March quarter, revenue in the six months to June 30 was $382m, down from $663m in the previous 6 months. Combined production rose 14.7% in the June quarter. The company said Zircon prices appeared to have stabilised and had even increased slightly towards the end of the financial year. Rutile and synthetic rutile prices continued to fall.

The Bernanke factor is the one that will dictate the tone of trade in the near term. The Fed chairman has led the discussion on QE in expansive fashion lately. The Q&A with the politicians could lead to volatility although fundamentally it's hard to see why the hard won understanding that has been established in recent weeks would be undermined. It's reasonable to suggest Mr Bernanke will echo the sentiments from his recent press conference at the congressional testimony. Bernanke's testimony is split into 2 parts: prepared remarks are released at 10:30pm AEST; the committee hearing (including the Q&A) commences at midnight AEST

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