Australian Stock Market Report – Midday 10/18/13

MID SESSION UPDATE
(12:30 AEDT)

Global Markets have responded positively to the developments of the last 24 hours. In particular US stocks have rallied, pushing the S&P 500 to a new all-time high.

The primary driver has been less about the (short term) political resolution in Washington and more about the impact on the timetable for a tapering of the Fed's Q.E program. The prevailing view being, that activity and confidence levels will continue to be influenced by the 16 day Government shutdown and the need to revisit the same issues of the debt ceiling and funding the government in several months time.

The moves in seen in equity, bond and currency prices reflect the belief that under these circumstances the Fed is likely to delay any tapering of Q.E. Life just got a little harder for shorters and sellers, notwithstanding the hurdles that remain to be navigated.

As we've seen in recent weeks the dips have been short lived. Since the lows of June the ASX200 is up 14%. The Fed keeping the taps open on Q.E will maintain support for the commodity complex in general.

One of the features of Friday's session has been the rising volume. Whilst volume in recent hours has tapered off, transactions in the first hour of trade were noteworthy with about a billion dollar's worth of shares changing hands. The theme of investors willing to engage with higher prices has been consistent over recent weeks despite the uncertainty being created in Washington.

Banks and financials have been the mainstay in early trade although most sectors have been well supported by buyers.

The Murray Goulburn Diary Co-Operative made a takeover bid for Warrnambool Cheese and Butter (ASX: WCB) trumping a rival bid currently in play from Canadian dairy operator Saputo. Murray Goulburn has announced an off-market takeover offer at $7.50 a share. The Canadians are bidding $7 a share, which has been recommended the board of Warrnambool. Additionally the bid relegates one made by Bega Cheese which would involve WCB shareholders receiving 1.2 Bega shares in addition to $2 cash. If successful, the bid would create one of the largest Australian-owned food and beverage businesses with annual revenues of more than $3.2 billion.

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