Australian Stock Market Report – Midday 5/1/14

MID-SESSION REPORT
(12.20pm AEST)

The Australian sharemarket is losing ground for the second time this week, with the mining and financials the biggest drags on trade. The All Ordinaries Index (XAO) is down 0.4 per cent and is trading below 5450.0pts.

ANZ Banking Group (ANZ), Australia's third biggest bank on the local market is down 1.3 per cent despite recording a better than forecast $3.515bn first half cash profit. This was around 1.5 per cent above market estimates. The bad and doubtful debt charge of $528m was higher than expected. The other major banks are also coming under pressure, with National Australia Bank (NAB) down 1.1 per cent, Westpac (WBC) down 1 per cent and Commonwealth Bank (CBA) unchanged. Three of the four major banks cracked through all-time record highs over the past week however.

Home prices rose by a more subdued 0.3 per cent in April according to a report issued by RP Data/Rismark. Property prices have jumped by 11.5 per cent over the past year with Sydney and Melbourne among the standouts. Median home prices in Sydney (i.e apartments and houses) was $680,000 between February and April. The median house prices was $802,000.

A report on the health of China's manufacturing sector showed a slight improvement in the industry; however China's manufacturing sector is certainly not shooting the lights out. The reading rose slightly from 50.3 to 50.4 in April. A number above 50.0 indicates industry expansion. Despite an initial slide in the Australian dollar, our currency has strengthened in the past hour to US92.94c.

China's crackdown on the use of commodities as collateral is impacting the miners. Fortescue Metals Group (FMG), which exports almost all its iron ore to China, is hardest hit. FMG shares are down 3.2 per cent and have slumped by more than 8 per cent this week. FMG has a higher breakeven price for mining iron ore than the larger BHP Billiton (BHP) and Rio Tinto (RIO) - i.e it costs FMG more to produce each tonne of iron ore than the most efficient players (about 65 per cent more).

Property group, Mirvac (MGR) is up 0.14 per cent. It expects to grow its earnings per share by between 8-10 per cent this year despite challenging conditions.

Public holidays in a number of countries across the region, could keep volumes a little subdued today.

At lunch, 802.6 billion shares have been traded, worth $1.83 billion. 320 stocks are up, 415 are in the red and 336 are unchanged.