Australian Stock Market Report – Afternoon October 27, 2014

Banks extend early gains

 Monday afternoon provided more encouragement for market optimists with the ASX 200 remaining in the vicinity of session highs over the second half of the day. This fact was impressive for the fact that miners moved back into the red as a group following a recovery earlier in the morning.

 Junior iron ore miner Mount Gibson (MGX) saw its shares fall 4% after announcing that mining at the main pit of its Koolan Island iron-ore mine in W.A had been suspended due to the potential for a pit wall collapse. A slump, which has potentially reduced the effectiveness of a small section of the seawall, occurred on 24 October 2014. After an evaluation over the weekend, Mount Gibson anticipates it will take approximately four weeks to complete remedial work necessary to repair the affected area and recommence production in the Main Pit. The group is maintaining its full year sales guidance of 6.6 to 7.0 million tonnes, despite expectations that approximately four iron ore shipments from Koolan Island will be delayed in the December quarter.

 Financials continued to provide the bedrock for day's improvements as investors look forward to results being reported. The NAB (NAB) starts bank earnings season with its full-year numbers on Thursday, followed by ANZ (ANZ.AU) and Westpac (WBC.AU) on following days. Regional banks also moved ahead with Bendigo and Adelaide Bank Limited (BEN) rising by 0.7%. At the lenders AGM today, CEO Mike Hirst highlighted the set of factors that has led to operating conditions being mixed at best. BEN's CEO pointed to subdued consumer spending as a reflection of a preference on the part of consumers to pay down debt. At the same time low interest rates have seen the banks new loan book grow, although competition remains a significant headwind. BEN's CEO said the recent issue of convertible preference shares had readied the groups balance sheet to meet new Basel III requirements and provide sufficient capital to pursue growth opportunities.

 Shares in Tatts Group (TTS) rose 0.9% following news that the group will offer scratchies and daily keno in Victoria. The move follows a decision by rival operator Intralot to conclude its operations in Victoria. Consequently the Victorian government approved a similar license allowing the group to sell products similar to those offered in other states.

 The Aussie dollar rose above $US 0.8800 despite comments at the weekend from a member of the PBoC's monetary policy advisory committee that China's economy should slow to 7.2% in the final quarter of 2014 compared to 7.3% in the third quarter.

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