Australian Stock Market Report – Midday 5/27/13

Mid Session Report

(12:00 AEST)

The new week has started the same way the last one finished, with sellers on the front foot. The debate about the US Federal Reserve exiting its quantitative easing program continues to dominate the bigger picture. At a local level the earnings picture is creating concerns with profit downgrades figuring prominently in recent weeks.

That theme continued to play out on Monday morning in the wake of weak sales numbers from David Jones. As a result consumer related stocks were the worst performing group on the ASX. David Jones (DJS) said that total sales in its 3rd quarter were down by 2.2% to $391 million. The markets were looking for a higher number in the range of $401 million or an increase of 0.3%. The measure of like for like sales was down by 3.4% to to $386. It was a familiar refrain that the retailer offered in placing the results in context including, weak consumer sentiment and the winter period starting with warmer than expected temperatures which affected women's apparel.

Metals prices were largely flat at the end of last week, although investors remain wary about outlook for commodity prices in general given the recent strength of the US dollar. Mining stocks were generally weaker in early trade. Fortsecue Metals Group was one of the bigger decliners in the group losing around 3% with the price of spot iron ore back to around $US 123 per tonne.

InvoCare Limited (IVC), which operates funeral homes, cemeteries and crematoria in Australia, New Zealand and Singapore, continued to be discounted on Monday. The group which operates funeral homes under the White Lady and Simplicity Funerals brands fell 6% on Friday following its AGM update. The group said revenue growth is weaker than expected and its net profit growth of 7.7% was below its full year expectations of around 15%.

One of the big stories of last week was James Packers exit from the Echo Entertainment Group (EGP) share register. The stock fell 12% on Friday after news that Mr Packer had sold his $264m stake despite gaining final approval to increase his stake past 10%.

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