Australian Stock Market Report – Midday 5-1-13

MID-SESSION REPORT
(12.30pm AEST)

Local shares are slipping for the first time this week despite firmer global markets overnight. A lower than expected reading for China's official manufacturing PMI has kept investors in a selling mood. The All Ordinaries Index (XAO) is down 0.3 per cent or 18 pts to 5,150.6.

China's PMI has fallen from 50.9 to 50.6. This signals modest expansion however the reading is getting uncomfortably close to 50.0; a level which separates contraction from expansion. This highlights that China's economy is still far from shooting the lights out.

The mining sector continues to be the biggest drag, with BHP Billiton (BHP) down 1.7 per cent while Rio Tinto (RIO) is down 1.8 per cent. The broader resources industry is now down by 14.27 per cent since January 2013. Gold miner, Newcrest Mining (NCM) is 2.5 per cent weaker.

The major banks are struggling to back up Tuesday's stellar performances led by ANZ Banking Group (ANZ) which recorded a better than expected profit result. ANZ is down 0.1 per cent at lunch, Commonwealth Bank (CBA) is a touch lower also while both Westpac (WBC) and National Bank (NAB) are higher.

On the economic front locally, monthly dwelling values in addition to manufacturing data were issued this morning. As expected dwelling values eased by 0.5 per cent in April after solid 2.8 per cent gains from January to March. Home prices in Darwin have jumped most over the past year (5.9 per cent) while Hobart has been the biggest underperformer (prices down 1.4 per cent).

Further proof that the strength of the Australian dollar is hurting our exporters today, with Manufacturing PMI hitting close to a 4-year low. According to the report issued by the Australian Industry Group, "Manufacturing activity contracted significantly in April as conditions weakened amid a strong Australian dollar, intense import competition, high energy costs and weak local confidence."

At lunch, 758.7M shares have been traded worth $1.73bn. 326 stocks are higher, 448 are slipping while 316 are unchanged.

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