Australian Stock Market Report – Midday 6/21/13

MID-SESSION REPORT

(1pm AEST)

The Australian market is losing ground for the second consecutive session, with the All Ordinaries Index (XAO) down 0.3 per cent. The situation was dire this morning however, when the index was down by more than 1.5 per cent in early trade.

This follows on from the biggest tumble in four months which took place yesterday in Australia. The XAO fell by 2 per cent on Thursday. The weakness has much less to do with things going pear shaped last night and more to do with Ben Bernanke's comments at 4am (AEST) Thursday morning. The Fed's Chairman confirmed that the central bank aims to reduce stimulus and potentially cease QE altogether by the middle of 2014 if conditions permit.

Bernanke's comments have pushed the Australian dollar to a (close to) three-year low against the greenback, slipping by US3c in the span of 24 hours. This is a development welcomed by local exporters, who have done it tough due to the strength of our currency. Just a US1c move down in the Australian dollar equates to around US$110 million in additional profit for BHP Billiton (BHP). BHP has sold a 15 per cent stake in an iron ore mine in the Pilbara region of Western Australia for US$1.5 billion to two Japanese groups. The miner's shares are easing by 0.5 per cent.

The price of gold slumped by US$87 an ounce overnight; a 6.4 per cent fall. Gold producers such as Newcrest Mining (NCM) have been hard hit today. The lower gold travels, the harder it becomes for the precious metal producers to maintain margins and improve profitability.

The big four banks are easing by around 0.2 per cent, while Westpac (WBC) is the worst of the majors, sliding by around 1 per cent.

No major economic data is due for release today locally. Across the region, the Bank of Japan's Governor will be delivering a talk in Tokyo at the National Association of Shinkin Banks at 4.35pm (AEST).

At lunch, 1.08 billion shares have changed hands, worth $2.62 billion. 259 stocks are higher, 649 are lower and 357 are unchanged.

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