Australian Stock Market Report – Midday 3-27-13

Mid Session Report

Early trade on Wednesday has seen an improved tone compared to recent days. Investors have chosen to focus on the improved economic readings from the US in the last 24 hours rather than lingering European concerns.
In Europe overnight there were modest gains for core markets (France, Germany, and UK etc.). Although financial stocks dragged the Spanish and Italian markets lower. In the aftermath of the Cypriot bailout, investors continue to reflect on the possibility that depositors could abandon weaker European banks in favour of stronger institutions. To this end the leading banks in Spain fell by 2-3% overnight.·

At the midpoint of the session on Wednesday most sectors measured by the exchange were higher, although volumes were diminished by the long Easter break coming into view for participants.

Mining stocks have been serial under performers in the first quarter although they were the best improved group at lunchtime with Fortescue leading the way on gains of more than 3%

Insurer QBE was a standout amongst its peers with a gain of just over 3%. Earnings guidance was maintained as the group spoke confidently about the year ahead and the transformation strategy which is aimed at cutting $250 million from its cost base over 3 years. The value derived from this cost cutting initiative is expected to gain traction by the end of the current calendar year. Elsewhere in the sector IAG was ahead by 1.3% and Suncorp was up by 2%

The Housing Industry of Australia and the CBA released their survey of Housing Affordability. The Index increased by 5.5 per cent in the December 2012 quarter to be up by 18.4 per cent over the year.

Housing affordability in regional Australia increased significantly again in the December 2012 quarter to reach its highest level in around a decade. Housing affordability improved in all capital cities. Sydney remained the least affordable city and Hobart continues to be the most affordable. The improvement in affordability was driven by the reduction in interest rates and increases in Average Weekly Earnings (AWE). The weakness of house prices also underpinned higher affordability.

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