Australian Stock Market Report – Midday 5/30/14

MID-SESSION REPORT
(12.10pm AEST)

The Australian sharemarket is losing ground for the second straight day but for just the second time in a fortnight at lunch. Continued weakness in the iron ore price (Australia's biggest export) is placing the miners under pressure. U.S. markets managed to rise overnight despite recording its first quarterly economic contraction in three years overnight. The All Ordinaries Index (XAO) is down 0.2 per cent.

The price of iron ore slumped by 1.1 per cent to US$95.7 per tonne overnight. This takes the weakness in the metal this year to 27 per cent. Since 1 January 2014, the smaller less cost effective producers of the metal have been hit hardest. Gindalbie Metals (GBG) is down 49 per cent this calendar year; Atlas Iron (AGO) is down 40 per cent while Fortescue Metals (FMG) is 23 per cent softer. The two largest producers in Australia, BHP Billiton (BHP) and Rio Tinto (RIO) are much better off. It costs both BHP and RIO around half as much as many of the junior miners to produce ore.

The major banks are all trading lower by as much as 0.6 per cent. Westfield Group (WDC) and Westfield Retail Trust (WRT) have both resumed trade after being in a halt yesterday. A vote to merge the Australian and New Zealand assets with WRT has been postponed for two weeks. WDC is up 0.05 per cent while the smaller WRT is 0.9 per cent softer. WDC investors are much keener for the split to go ahead as the Australasian assets have been underperforming.

At lunch, 718 million shares have been traded, worth $2.97 billion. 436 stocks are higher, 313 are in the red and 319 are unchanged.

No major market moving economic news is issued today; however private sector credit figures are still important nonetheless. The value of outstanding loans across the Australian economy grew by a slightly better than expected 0.5 per cent in April. This takes growth for the year to 4.6 per cent - the most significant annual growth reading in five years.

The Australian dollar buys US93.1 cents; a full US1c firmer that this time last week.

Plenty of economic data has been issued in Japan so far today. Core consumer inflation is up 3.2 per cent over the year, unemployment remains fixed at 3.6 per cent while production slipped by a greater than expected 2.5 per cent last month.

Looking ahead, German retail sales data out tonight will be a highlight in Europe while statistics on personal income and spending trends will be in focus in North America.