Australian Stock Market Report – Afternoon 7/8/13

Commsec Afternoon Report
(17:00 AEST)

• Better than expected employment numbers in the US at week's end and gains for US stocks failed to translate to gains for the local market on Monday. There was a fillip at the outset of trade with some modest gains, although the gains were short lived and the index spent most of the day in the red.

• Today's economic news did little to help the atmosphere. Job ads data continued to weaken. The combined number of internet and newspaper job advertisements, as tracked by ANZ, fell by 1.8 per cent in June, the fourth consecutive monthly decline. Job ads are down 18.7 per cent on a year ago to 129,720 - a near four year low. The figures don't bode well for the ABS unemployment report set for release on Thursday although a significant disconnect has developed between the 2 series in recent times to the extent that the market has tended to discount the job ads data.

• Much has been made of the benefits of a weaker Aussie dollar in relation to exporters although households are set to feel more pressure at the petrol pump in the weeks ahead. The national average petrol price has consolidated during the past week, although the Singapore gasoline price has surged to a fresh 15-month high. It's reasonable to expect that around 2-3 cents per litre is likely to be added to the pump price over the next 7-10 days, which could influence attitudes towards discretionary spending. On Monday consumer discretionary stocks ended higher whist consumer staples ended lower.

• The technical picture for the Aussie dollar remains challenging in the wake of the stronger read on US jobs. Non farm payrolls rose by 195k, with May gains also revised up to 195k. This was a combined 50k better than expected. The revisions also ensured that the 6 month average for job gains has been over the 200k per month mark for 5 of 6 months in 2013 so far the local currency appeared to be having troubling consolidating above US 90 cent on Monday as a result. The challenge will come in European trade, as to whether investors will continue to support the currency or wether lower levels are required to attract buyers

In Europe the week ahead should be a relatively quiet; Interest on today's economic calendar is limited to German industrial production numbers at GMT11.00

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