Australian Stock Market Report – Midday 1/21/14

MID-SESSION REPORT
(12.30pm AEDT)

The Australian sharemarket has crept into positive territory after a slightly weaker start. The All Ordinaries Index is up by less than 0.1 per cent; however is being held back by an underperforming mining sector. U.S. sharemarkets were closed last night due to the Martin Luther King Jr Day holiday; keeping trading volume lighter than usual. There is no major economic news scheduled for release in Australia or the region today; however yesterday's slightly better than expected Chinese GDP reading helped minimise stock losses and strengthen the Australian dollar on Monday.

The miners were the standouts yesterday; however are holding back the market most at lunch. Iron ore focused miners in particular are being hit hard as the price of ore slumped by 2 per cent overnight (the biggest daily fall of 2014). Atlas Iron (AGO) is down 4.08 per cent, while both BHP Billiton (BHP) and Rio Tinto (RIO) are also in the red. Australia's second largest business, BHP is 0.3 per cent lower and continues to struggle breaking through the $38.00 per share level (although it has tested $38.00 a number of times since October 2013). RIO (which makes most of its money from the production of iron ore) is slumping by 1.23 per cent.

Canadian dairy giant, Saputo now has a 47.85 per cent interest in Victorian based dairy business, Warrnambool Cheese (WCB); a 21.4 per cent increase in just a week. Saputo currently has an unconditional $9/share takeover offer on the table for WCB, which values the business at around $504 million. The offer could rise to as much as $9.60 or $537 million should Saputo hold more than 90 per cent of WCB. WCB rose by 157.5 per cent in 2013 thanks to a three-way bidding war.

Three of the four major banks are higher, with Westpac (WBC) the only loser at lunch. Commonwealth Bank (CBA) is 0.48 per cent firmer, National Australia Bank (NAB) is 0.39 per cent higher and ANZ Banking Group (ANZ) is up 0.21 per cent. As a sector, the financials have slipped by 1.92 per cent; underperforming the broader market by 1.1 per cent.

The Australian dollar buys US88.1 cents and has slumped against the New Zealand dollar. A higher than forecast NZ inflation read increases the likelihood of a rate hike in New Zealand over the next few months; supporting the NZD.

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