Australian Stock Market Report – Midday 5/31/13

MID-SESSION REPORT

(12.30pm AEST)

Up until just before lunch, the Australian market was improving for the third time this week. Global markets were up modestly overnight, with shares in the US up 0.1 per cent while the German market jumped by 0.8 per cent.

The ASX200 Index is down by 0.1 per cent and hasn't traded above 5000.0 since last Friday. Overnight, worse than expected US economic news helped investors feel more comfortable that the Fed won't cut back on stimulus for the time being.

The most comprehensive measure of lending across was out at 11.30am (AEST). As expected by the market, lending rose 0.3 per cent in April. The more businesses and individuals borrow, the more likely they are to spend, which ultimately adds to Australia's growth. Almost half of Australia's growth is reliant on consumer spending.

Telstra (TLS) is down 1.26 per cent, losing ground for the third straight day. The ACCC this week reduced wholesale broadband charges that Internet Service Providers (ISPs) pay TLS to use its copper network.

The miners are leading the gains, with BHP Billiton (BHP) up 1.33 per cent, while Rio Tinto (RIO) is 2.08 per cent higher. Iron ore prices are down 30 per cent from the February highs. Just a US1/t move in iron ore means around US$110bn in profit for BHP in 2013.

In Japan, core inflation slipped by 0.4 per cent, with deflation still remaining a concern for the world's third biggest economy. The Bank of Japan (BOJ) aims to double the amount of yen in circulation, devaluing its currency and boosting exports.

Locally this week, the biggest quarterly falls in capital expenditure in 3.5yrs held the market back. The resources industry was the biggest drag, while non-resource sectors aren't picking up the slack. Building approvals rose 9.1 per cent in April; a positive sign for construction although this is a volatile reading. On Wednesday, the OECD cut global growth forecasts. The French based organisation expects the Australian economy to expand by just 2.6 per cent over 2013 (rather than its previous estimate of 3 per cent).

At lunch, 780 million shares have changed hands, worth $4.19 billion. 419 stocks are higher, 301 are in the red while 295 are unchanged.

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