Australian Stock Market Report – Afternoon September 8, 2014

A trader watches a monitor displaying stocks on the floor of the New York Stock Exchange February 4, 2010. A trader watches a monitor displaying stocks on the floor of the New York Stock Exchange February 4, 2010. — A trader watches a monitor displaying stocks on the floor of the New York Stock Exchange February 4, 2010. Reuters

Local shares continue last week's falls

 The Australian sharemarket kicked off the trading week in the red, with a record close in US equities on Friday night not enough to boostlocal markets. The All Ordinaries Index (XAO) fell by 0.4 per cent and remains below 5600pts. Volume was light with only $3.6bn worth of shares traded. Public holidays in China, South Korea and Taiwan kept markets in the region quiet, with shares in Japan up 0.25 per cent, while New Zealand's NZX50 rose by 0.15 per cent.

 The only two sectors to improve modestly today were consumer discretionary stocks and telcos. Telstra (TLS) rose by 0.2 per cent to $5.65 and continues to creep back towards its highs hit a fortnight ago pre ex-dividend. TLS hit a high of $5.755 on 26 August only to fall by 3.6 per cent or 21c when it traded ex-dividend the next day for its 15cps distribution.

 Sigma Pharmaceuticals (SIP) slumped by 2.3 per cent and paid $26.7m to buy Discount Drug Store (DDS). This adds 121 pharmaciesto its network and the acquisition was funded from existing cash. SIP is scheduled to release its FY14 earnings results on Thursday. Woolworths (WOW) rose 0.2 per cent. Australia's largest supermarket chain said ALH (which it controls) has sold 54 properties to a Charter Hall led consortium for $603m. ALH then plans to lease back the properties for the next two decades. WOW said it may use the proceeds to pay down debt.

 The price of iron ore fell by $0.70 to US$83.6/t on Friday which is a fresh five-year low. The price of ore has slumped by 5 per cent over just a week. Fortescue Metals (FMG) managed to rise by 2 per cent today; however is still down by 31 per cent Year-To-Date. BHP is down 6 per cent this calendar year, RIO is down 10 per cent and smaller producers like BC Iron (BCI), Atlas (AGO) and Gindalbie (GBG) have halved in value in just eight months.

 On the economic front, China posted a better than expected US$49.8bn trade surplus in August, boosted by a 9.4 per cent surge in exports over the year while imports slumped by 2.4 per cent. While the volume of iron ore bought by China over the year rose by almost 17 per cent, the dollar value of imports slipped by 0.1 per cent. At the close 2.18bn shares were traded worth $3.6bn. 439 stocks rose, 556 finished lower and 361 were unchanged.

 Tonight in Europe, Germany's monthly trade balance will be released together with a reading on investor confidence. In the US, July consumer credit (change in dollar value of consumer debt) and a speech by Treasury Secretary Lew will be highlights.

 This week is set to be busy not only in Australia but also in the region. A highlight for economists locally will be a report on jobs this Thursday when we'll find out how many jobs were created in August and what the unemployment rate is. Department store owner Myer (MYR) releases its FY14 profit results this Thursday. On Thursday in China inflation statistics for both consumer and business will be released while retail spending, production and investment are out on Saturday. Public holidays in the region until Wednesday will keep markets in the region quiet. Hong Kong and South Korea closed tomorrow.

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