Australian Stock Market Report – Afternoon June 13, 2014

EVENING REPORT
(4.30pm AEST)

The All Ordinaries Index (XAO) fell by 0.45 per cent today, hitting a two-month low and sliding for the third day. Despite some better than expected Chinese economic news late this afternoon, the Australian sharemarket finished lower with continued unrest in Iraq pushing both oil and gold prices higher while base metals fell in unison.

The price of iron ore fell by over 2 per cent last night as riskier assets were out of favour with investors. Australia's third largest ore producer, Fortescue (FMG) slumped by 6.24 per cent and 10.2 per cent this week while larger producers BHP and RIO lost more than 1 per cent.

The price of crude oil shot higher by more than 2 per cent overnight due to supply concerns and continued unrest in Iraq. Iraq is the seventh biggest oil producer. Woodside Petroleum (WPL) rose 1.9 per cent while Santos (STO) improved by 1 per cent. The major banks fell by as much as 0.9 per cent while Telstra (TLS) ended flat.

The Australian sharemarket fell by 1.1 per cent this holiday shortened trading week, with the miners the worst performers. Mining stocks slumped by 2.73 per cent since Tuesday while the energy sector improved by 0.6 per cent thanks to firmer oil prices. The May jobs report out yesterday was the main piece of data locally. 4,800 jobs were lost last month which was worse than expected; however 22,200 full-time jobs were created. Since the start of 2014, over 100k full-time positions have been added.

China, our largest trading partner released three economic reports today - industrial production, retail sales and investment. Production, which measures factory activity rose at an annual pace of 8.8 per cent in May, retail spending jumped by 12.5 per cent and investment in China's economy was modestly firmer than anticipated. Locally, total lending finance rose by 3.5 per cent in April, making it the strongest gain in five months. CommSec Chief Economist Craig James said "There is a fundamental re-assessment occurring across Australia about debt. Businesses are recognising that debt finance is cheap and gearing levels are low, so are taking on more debt. But Aussie consumers are shunning debt with presumably many cutting up credit cards, or at least closing credit card accounts, taking the latest data at face value."

At the close, 2.1bn shares had traded hands on the Australian market worth $6.5bn. 403 stocks ended higher, 555 in the red and 409 flat. Tonight, monthly numbers on trade will be released in Europe at 7pm (AEST). In the US, a monthly report on consumer sentiment together with an update on business inflation will be released. Developments in Iraq will continue to demand the most attention however and are likely to influence commodity prices.