Australian Stock Market Report – Afternoon 8/12/13

Afternoon Market Report
(17:00 AEST)

After some toing and froing in the first hour of trade this morning, buyers were able to assert themselves thereafter. The key to the improved performance for the overall market was the improvement seen in the resource sector. Commodity prices, and metal prices specifically, ended last week on a strong note in response to a number of encouraging economic reports from China on Friday.

Base metals prices rose as much as 2% on the LME on Friday. One of the main factors that is positively influencing perceptions towards resources at the moment is the price of iron ore remaining at elevated levels. Additionally the notion that Chinese economic activity appears less vulnerable to further weakening is adding to the better tone globally for stocks

Monday was a busy day for company results. Engineering services group UGL (UGL) said net profit fell by 73% to $36.47m. However, underlying profit bettered expectations of $90m coming in at $92.1m. Much of the focus in the result was trained on intentions to demerge the engineering and property businesses. To this end UGL's result was weighed down by more than $55m in restructuring costs. UGL provided guidance for 2014, expecting an underlying net profit in the range of $120m to $130m.

Retailers and consumer related stocks saw reasonable gains. David Jones (DJS) shares rose almost 5% on news the group had offloaded its worst performing business to Dick Smith Electronics. From October 1 the electronics sections of David Jones department stores will be run by Dick Smith and rebranded as David Jones Electronics Powered By Dick Smith´.

Ahead this week, the US dollar will remain one of the key factors influencing the general tone for global markets. US economic events in the days ahead will be key drivers. These include, US July retail sales on Tuesday. Federal Reserve speakers will remain in the mix of influences, including regional Fed President Lockhart who will speak on Tuesday and Fed President Bullard who will do the same on Wednesday and Thursday. Elsewhere US July industrial production and CPI are due on Thursday. Recent US economic news suggests that a soft patch could be coming to an end and. Where Fed officials are concerned it's important to keep in mind that recent communication seems to be skewed towards an earlier start to Q.E tapering.

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