Australian Stock Market Report – Afternoon 8/2/13

EVENING REPORT
(5.30pm AEST)

A 1 per cent improvement for the All Ordinaries Index (XAO) made today the happiest Friday since 14 June for the local sharemarket. The Australian market has now gained ground for six straight weeks and has only eased on two of the past 10 trading sessions. The XAO is only around 120 points (or 2 per cent) away from a five-year high.

The much anticipated budget update was delivered today at 1pm (AEST). The announcement of a bank levy spooked investors yesterday and pushed banking companies significantly lower on Thursday. Treasurer Chris Bowen and finance minister Penny Wong announced a 0.05 per cent levy on deposits less than $250,000 from January 2016. The four major banks recovered this afternoon, with Westpac (WBC) leading the financials higher with a 1.9 per cent improvement as investors were bracing for a worse outcome.

Mining stocks were amongst the standouts, with iron ore focused, Rio Tinto (RIO) gaining 2.4 per cent while the larger BHP Billiton (BHP) rose by 1.7 per cent and is trading close to a 4.5 month high.

Tonight, the monthly non-farm payrolls (US jobs report) will demand much of the attention. The market expects the creation of around 184,000 jobs, pushing the unemployment rate from 7.6 per cent down to 7.5 per cent. A strong jobs report is likely to support the market's view of QE tapering starting in September.

By market close, 1.89 billion shares changed hands, worth $4.53 billion. 518 stocks ended higher, 393 stocks slipped and 304 finished unchanged.

This week, the mining sector jumped by 2.5 per cent, the telcos rose by 2.95 per cent while the consumer staples gained 2.6 per cent. Around the region, the health of China's manufacturing sector according to an official government survey beat consensus and assisted the miners.

Next Tuesday, the Reserve Bank (RBA) is expected to cut the cash rate from 2.75 per cent to 2.5 per cent. The market is pricing in a 91 per cent chance of a cut at 2.30pm (AEST).

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