Australian Stock Market Report – Midday 5-10-13

MID SESSION REPORT

(12:30 PM AEST)

The main talking point in the early part of Asian trade has been the sharp rally in the US dollar as the Wall Street day was winding down. Many unilluminating rationalisations for the move have been offered, most of them turning around the US Fed's mindset towards quantitative easing. The better reading overnight in relation to the number of US unemployed claiming benefits was seen as adding credence to this view.

A stronger Greenback has several implications for the local market. Companies like ,News Corp, QBE Insurance, Brambles, Amcor, Ansell and Resmed will benefit from a stronger Greenback given they generate their revenues in US dollars.

For some time the strength of the local currency has been seen as an impediment to international investors who have been seeking attractive entry points into the local stock market. One of the primary attractions of the local market is that it is one of the highest dividend paying markets globally. With global central banks pushing zero interest rates as a way of kick starting their economies, the Australian share market is seen as a desirable destination for investors who are equally focussed on income (dividends) as they are on capital gains.

The ANZ was the underperformer as far as the big four banks were concerned. The lender said early on Friday that it will reduce its standard variable mortgage rate by 27 basis points to 6.13%. All of Australia´s big banks, have now passed the on the full rate cut to customers after The Reserve Bank of Australia cut official interest rates by 25 basis points to a record low of 2.75% on Tuesday.

The RBA has released its quarterly Statement of Monetary Policy. The document provides little in the way of additional colour following Tuesday's rate cut. The Bank trimmed its forecast for economic growth this year to 2.5% from the 2-3% offered previously. The RBA said inflation would be running at 2.25 per cent by the end of the year, lower than the 2.5 per cent it had forecast three months ago. Inflationary outcomes are now skewing towards the lower end of the 2-3 per cent range that it targets, increasing the chances of rates remaining lower for longer in the absence of additional rate cuts.

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