Australian Stock Market Report – Afternoon 7/26/13

EVENING REPORT
(5pm AEST)

The Australian markets edged higher for the fourth time this week, with the All Ordinaries Index (XAO) up 0.1 per cent. This is the fifth consecutive week of gains for local shares; the longest winning streak since January. Stocks in July so far have improved by an impressive 5.2 per cent; the best month in 1.5 years.

Australia's two largest miners, BHP Billiton (BHP) and Rio Tinto (RIO) announced plans to spend US$3 billion to build a desalination plant at the Escondida copper mine in Chile. The mine is situated in the middle of the desert, making sustainable water supply challenging. BHP shares slipped by 0.49 per cent today while the smaller RIO eased by 0.45 per cent.

Pharmacy products distributor and wholesaler, Sigma Pharmaceuticals (SIP) slumped by 6 per cent today after issuing a profit warning. SIP said it expects earnings to be held back by a number of cost intensive initiatives, such as creating an online retail store.

Over the week, most sectors improved, with the industrials one of the few losers, falling by 0.96 per cent. The energy sector also lost 1.24 per cent. The financials were the standouts, after rising by 2.23 per cent, while mining stocks jumped by 2.07 per cent.

On the economic front locally, quarterly CPI (inflation) was out this Wednesday and kept the door open for a RBA rate cut in August. Prices have edged higher by just 0.4 per cent over the previous three months, pushing the CPI 2.4 per cent higher over the year. The market is now pricing in a 53 per cent chance of a cut next month.

Also on Wednesday, Chinese "Flash" Manufacturing PMI disappointed, with the industry growing at its slowest pace in 11 months. The reading fell from a previous 48.2 to 47.7 in June (any number below 50.0 indicates industry contraction).

Australia's biggest gold miner, Newcrest Mining (NCM) improved by 11.6 per cent this week, despite warning the market of a likely fall in gold production between July and September. Gold prices rose by 3 per cent this week.

By the close, 1.94 billion shares changed hands, worth $6.38 billion. 489 stocks rose, 416 lost ground and 315 ended unchanged.

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