Australian Stock Market Report – Midday 10/14/13

MID-SESSION REPORT
(12.30pm AEDT)

Australian stocks are in the red for the third time in five trading sessions, with the All Ordinaries Index (XAO) down 0.8 per cent. All sectors are in the red, with weaker than expected Chinese trade numbers on the weekend combined with the US debt ceiling keeping investors on edge.

Australian based mining company, OZ Minerals (OZL) is down 8.2 per cent after cutting its annual copper production forecasts for the second time this year due to set backs at its Prominent Hill mine in South Australia. OZL is down 39 per cent this calendar year.

BlueScope Steel (BSL) is down 1.9 per cent, however has surged by 42 per cent since January. BSL announced it has agreed to acquire OneSteel's sheet and coil distribution assets to improve efficiencies. BHP and RIO are both a touch weaker while the major banks are easing by more than 0.3 per cent.

On the economic front, the number of new owner occupier home loans fell by 3.9 per cent in August. The market was expecting a bigger slide in home loans. First home buyers accounting for barely 13 per cent of all home loans.

The US govt shutdown has entered its 13th day. US Treasury Secretary warned each week of closure wipes out 0.25 per cent of annual growth. Consumer sentiment in the US fell from 77.5 to 75.2 in October (on Friday).

More importantly, the US economy runs out of cash on Thursday. Some progress is being made with negotiations (it seems), however a resolution is still a way off. Both the IMF and the World Bank warned the US on the importance of raising the debt ceiling. If the debt ceiling isn't raised, confidence, global growth, rates and credit ratings could be impacted.

Public holidays in Hong Kong, Japan, Indonesia and Canada will keep their respective markets closed and volume a little light. Tonight is Columbus Day in the US, which will result in the closure of bond markets, while equities are still expected to trade normally.

The Aussie dollar is likely to lose value against the greenback over the next year, however the nomination of Janet Yellen as Chief of Fed has decreased chances of an aggressive QE taper and thus keeping Aussie dollar strong.

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