Australian Stock Market Report – Midday 10/25/13

Midday Market Report
(12:00 AEST)

There have been a number of encouraging signs for the bulls in the last 24 hours.

The weak close on Wednesday as rising interest rates in China saw buyers retreat from stocks across the region has faded from memory and buyers have maintained the grind higher for the ASX200 this week, which has risen by 1.3% with several hours of trade remaining.

Resource buyers have returned having sat yesterday's session out. Markets will be looking for a confirmation of yesterday's better reading on the HSBC flash PMI of Chinese manufacturing in the weeks. In the near term the dynamic around Chinese activity appears to favour support for commodity prices. This view is further consolidated by the view that the Fed will not lift a finger to taper Q.E until the late part of the first quarter of 2014.

Transfield Services (TSE) says it will meet its full year earnings guidance. At its AGM the construction and maintenance group confirmed it expects net profit of between $65 million and $70 million for the 2013/14 financial year. Pre-tax restructuring costs of $6.3 million have been absorbed into the guidance. TSE has cut more than 250 jobs and a further 180 redundancies are expected this year as part of its restructure. TSE share were up 3% at lunch.

Asciano (AIO) expects lower growth this year. The coal and port operations were the main drivers of business in the September quarter. The rail business faced continued headwinds with lower volumes due to sluggish activity levels. AIO said its rail network has been damaged by recent bushfires which will impact haulage levels this month. AIO has maintained its forecast for full year earnings, albeit a lower rate compared to the nine per cent increase last year. Asciano's shares lost 4.5% at lunchtime.

Whitehaven Coal has reported a lift in coal. The miner sold 2.03 million tonnes of coal in the September quarter, a 26 per cent increase compared to the same time last year. WHC improved production at its Narrabri mine which produced a record 2.4 million tonnes, up 44 per cent on a year ago. The group highlighted falling prices, although remains cautiously optimistic about a recovery in Asian coal markets. WHC shares were up 2.5% at lunch.

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