Australian Stock Market Report – Midday 1/9/14

Mid Session Report
(12:00 AEDT)

Sellers remain in control of the ASX 200 on Thursday, finding traction as the US jobs report wheels into sharper focus following the developments in the last 24 hours.

The US ADP National Employment Report showed the private sector added 238,000 jobs in December - the fastest pace in 13 months. Analysts are looking for around 200,000 jobs to be added on Friday´s non-farm payrolls number. Markets are now on guard for a result that is substantially better, which could create concerns that the Fed will withdraw its support for the economy sooner rather than later.

The tone of the day improved in the wake of a better than expected reading on retail sales for November. Data showed retail spending lifted 0.7 per cent. The reading follows a 0.5 per cent lift in October. Retailers got a lift on the back of the figures. Equally important, the data stymied the progress of sellers who seemed intent on pushing the index below the 5300 level.

In other economic news, building approvals fell more than expected in November. The ABS said the number of buildings approved fell 1.5 per cent in the month. Economists had expected the figures to show a one per cent fall in approvals during the month. Building approvals have risen by 22.2 per cent in the last year. Markets were expecting an easing in the last month in the face of the strong rise in the series in recent months. Approvals for private sector houses rose six per cent in the month, and the ´other dwellings´ category, which includes apartment blocks and townhouses, was down 9.7 per cent.

Locally sellers have challenged the lows of yesterday's session with some success, managing to push the ASX200 down to 5295. Heading into the afternoon session this will be the level to remain mindful off in the event that sellers regroup with some conviction.

Qantas has had its credit rating downgraded to junk status by Moody´s who cited a sharp deterioration in the airline´s core domestic business, due to aggressive competition from rival Virgin Australia. Moody's expects that Qantas´ business risk and financial leverage will remain at elevated levels and inconsistent with an investment grade rating. S&P downgraded Qantas´s rating to junk status last month after the airline announced the axing of 1,000 staff and warned that it could post a $300 million first half loss.

[Kick off your trading day with our newsletter]