Australian Stock Market Report – Midday 3/7/14

Mid Session Report
(12:30 AEDT)

The Australian sharemarket is firmer thanks partly to a surge in U.S. equities overnight and yesterday's better than expected retail spending and trade figures locally. The All Ordinaries Index (XAO) is rising by 0.3 per cent; making it the fourth straight day of improvements and a 5.5 year high for local stocks.

In focus today is the Reserve Bank Governor's commentary before the House of Reps standing committee on economics, a monthly jobs report in the U.S tonight and tensions in Ukraine.

Last night U.S. stocks hit a record high, with the S&P500 index (a measure of how 500 of America's biggest companies are performing) up by 0.2 per cent. U.S. shares have surged by 22 per cent over the past 12 months; a 15 per cent outperformance compared to the Australian sharemarket.

Qantas (QAN) is unchanged at $1.15 however has dropped out of the ASX50 index in today's Standard and Poor's rating review. The Qantas Sale Amendment Bill was passed by the lower house yesterday; however still has to be voted on by the Senate, which will be a greater challenge.

32 companies are trading ex-dividend today on the Australian market. Although there are no significant market movers going ex-dividend, Air New Zealand, Brambles, Seven West Media and Slater & Gordon are all included.

The Reserve Bank Governor, Glenn Stevens warned home buyers to not take on too much debt when purchasing a property. He considers a period of interest rate stability to be supportive of both businesses and households. Interest rates have remained at 2.5 per cent for seven straight months and the strong economic news issued this week makes a rate cut this year more unlikely.

Weakness from the property trusts and financials is holding the market back today. The big four banks are mixed; with Westpac (WBC) down 0.85 per cent while National Australia Bank (NAB) is easing by 0.37 per cent. WBC has made changes to its management team, with current Chief Financial Officer Phil Coffey appointed to Deputy Chief Executive Officer.

The Australian dollar buys around US91c and is trading at a three month high. Today's speech by the Reserve Bank Governor together with yesterday's better than expected economic data are pushing the local currency higher.

Standard and Poor's Rating Review today has resulted in QAN being replaced by the owner of NRMA; IAG on the ASX20. Virgin Australia (VAH) has been replaced on the ASX200 by Bega Cheese (BGA). Changes are effective on 21 March.

At lunch, 734.5m shares have changed hands, worth $1.37 billion. 494 stocks are higher, 301 are in the red and 322 are flat.