Australian Stock Market Report – Afternoon June 3, 2014

EVENING REPORT
(4.30pm AEST)

The losses steadily accelerated today, with the All Ordinaries Index (XAO) finishing close to the lows of the day; down 0.7 per cent to 5460.5. Worse than expected Chinese date and softer than forecast retail spending numbers kept investors uninspired.

The defensive utilities finished flat while all other sectors finished in the red. The sluggish Chinese manufacturing read and continued iron ore weakness hurt the mining sector. BHP Billiton (BHP) fell 0.5 per cent and is trading around a two-month low. The smaller Rio Tinto (RIO) managed to buck the trend; rising by 0.7 per cent. RIO is significantly underperforming the larger BHP since the start of this calendar year-down 12.5 per cent.

Oil and gas explorer Karoon Gas (KAR) added to yesterday's 42 per cent surge after announcing the sale of its stake in two exploration permits in the Browse Basin to Origin (ORG) for US$800m. KAR rose by 2.85 per cent today, while ORG slipped by 0.8 per cent.

Rare earth minerals miners Lynas Corp (LYC) jumped by 9.7 per cent after raising $40m to buy some time for the Victoria based miner to ramp up production. LYC shares are still down 42 per cent this calendar year.

Three of the four major banks lost ground today, with National Australia Bank (NAB) losing 0.7 per cent while Commonwealth Bank (CBA) fell away from the all-time high of $82.44 reached yesterday.

As expected the Reserve Bank (RBA) decided to keep rates at 2.5 per cent for the 11th month. The central bank has few reasons to either cut or lift rates for the next few months. Inflation is under control, home prices are showing signs of slowing, economic growth is largely as expected while strong construction is picking up some of the slack from a lack of mining investment. A rate hike late this year is still a possibility however the weaker iron ore price and firm Australian dollar are concerns.

Retail spending rose for the 12th month although did rise by a less than expected margin of 0.2 per cent in April. The retail sector lost substantial ground today.

At the close 1.74bn shares were traded, worth $4.53bn. 357 stocks finished higher, 611 ended in the red and 375 flat.

Tonight, unemployment in Europe and factory orders in the U.S. will be in focus.

Tomorrow, the March quarter GDP reading will be issued locally. The Australian economy is expected to have expanded by around 3.3 per cent between January and March. G7 meetings will kick off in Brussels on Wednesday night and the South Korean sharemarket will be closed due to Municipal Elections.