Australian Stock Market Report – Midday 5/23/14

MID-SESSION REPORT
(12.10pm AEST)

The Australian sharemarket continues to make up for the tough start to the week, with better than expected signs for China's manufacturing industry yesterday and modest gains in U.S. markets overnight helping. The All Ordinaries Index (XAO) is up 0.3 per cent, with only the miners and energy stocks losing ground at lunch.

The price of iron ore is still hovering around a 20-month low, despite an improvement in prices overnight. The weakness in Australia's biggest export has been putting many of the ore producers under selling pressure this week. Rio Tinto (RIO), Australia's leading producer of the metal is down 0.26 per cent while BHP Billiton (BHP) is 0.37 per cent lower. Smaller producers such as BC Iron (BCI) are managing to improve 1.3 per cent, in what was a horrid start to the week Monday through to Wednesday.

Gold producers are mixed, with Newcrest Mining (NCM) 0.7 per cent firmer while the smaller Regis Resources (RRL) is slumping by 10.5 per cent. NCM has opened Australia's largest underground mine at its Cadia Valley Operations near Orange today. RRL is falling after cutting its production expectations.

Telstra (TLS) is trading at fresh nine-year highs of $5.40. The telco is improving for the sixth straight day and despite the recent gains is still yielding around 5.3 per cent. This means that holders of the stock for a year or more will receive 5.3 per cent return (via the dividend). Building materials company James Hardie (JHX) is down 2.9 per cent after surging 5.7 per cent yesterday thanks to a solid annual profit result.

Wine maker Treasury Wine Estates (TWE) is up 4 per cent on takeover speculation. Early in the week, TWE turned down a $4.70 per share ($3.05 billion) takeover bid by U.S. investment firm KKR. TWE is up 25 per cent this week.

The Australian dollar has been weighed down by the weak iron ore price and sits at US92.3 cents.

No major economic news is scheduled for release in Australia or the region today.

Tonight the European Parliamentary Elections will continue. In the U.S, new home sales data will be issued. Sales are expected to surge by around 12 per cent following its 14.5 per cent slump in March.