Australian Stock Market Report – Afternoon July 23, 2014

CommSec Evening Report (4.30pm AEST)

Today was a solid day for the markets and investors at last we saw the market putting some good ruins on the board and the ASX 200 hit a new 6 year high. The market was boosted by positive quarterly numbers from BHP Billiton Limited (BHP) and a strong rally into bank, insurance and transport stocks.By the end of trade the All Ordinaries Index had added 33 points and the ASX up 0.6% to 5576.7 points. The market trading volume increased today to 2.3Billion shares and all sectors closed higher.

The materials sector higher boosted by BHP up over 1.2% to $38.98, after posting its stronger than expected full year iron ore results today BHP production lifted by 19% in the quarter and said it expects its FY15 production from the Pilbara region to exceed FY14. Rio Tinto Limited (RIO) was also stronger while Alumina Limited (AWC) up 4.3% and Lynas Corporation Limited (LYC) up over 17.6%.
Sandfire Resources (SFR) share price ended flat today after a solid run in early trade. Sandfire released its quarterly production report today they advised the market that volumes were slightly weaker than expected. For the full year 2014 SFR produced 67.700/tons of copper and 33.900 ounces of gold. But on a positive side SFR costs per pound was lower than the market had expected at US$1.18/lb.

Hutchison Telecommunications (HTA) shares fell by 8%. The part owner of Vodafone Australia posted another loss with its revenue sliding 97% over the half. Vodafone lost 137,000 mobile subscribers between January and June 2014.

The energy sector lifted today even with the US$ oil price falling back from US$105 a barrel at the close of trade yesterday to now be back below US$104/bl at $103.89 a barrel off US$0.70. The gold price was unchanged by the end of the Australian trading day now at $1,308 an ounce.

Qantas (QAN) share moved higher in early trade after the Sydney Morning Herald (SMH) ran a story stating Qantas was in talks and was considering splitting its domestic operations. QAN share price was up 1.6% to $1.27.

In Economic News - Today the June Quarter Consumer Price Index was released- the main measure of inflation in Australia - it showed a lift of 0.5% in the June quarter, in line with expectations. In seasonally adjusted terms the CPI rose by 0.6%. The CPI stands 3.0% higher than a year ago. The Reserve Bank monitors three measures to derive the underlying inflation rate. The trimmed mean rose by 0.8% in the June quarter (2.9% annual); the weighted median rose by 0.6% (2.7% annual).

The Bureau of Statistics (ABS) noted: "The most significant price rises this quarter were for were for medical and hospital services (+4.6 per cent), new dwelling purchase by owner-occupiers (+1.6 per cent) and tobacco (+3.1 per cent). These rises were partially offset by falls, for domestic holiday travel and accommodation, (-3.8 per cent), automotive fuel (-2.7 per cent)

Today - CBA announced that we have pushed out our RBA rate rise call from November 2014 to February 2015. We feel that the fundamental inputs into the monetary policy equation still favour higher rates in the long run but RBA "atmospherics" and a focus on the AUD make our long held November 2014 call look ambitious.

Our monetary policy views have been largely set since the last RBA rate cut in Aug 2013. We argued at the time that the resultant 2½% cash rate would mark the low point for the cycle. And our thoughts on how the inputs into the monetary policy equation would evolve during 2014 supported a call that a modest tightening cycle was likely from Nov 2014.

Today the AUD shot higher after the CPI were released hitting 94.39 US cents up from to 93.90 US cents. Now the Australian dollar is trading at 94.32USC