Australian Stock Market Report – Midday 7/31/13

MID-SESSION REPORT
(12.30pm AEST)

Overnight US share markets closed mixed as cautious investing pushed the DOW down 1pt at the end of trade ahead of the outcome of the Federal Reserve meeting later tonight. There was a large sell-off in material and energy shares and a shakeup in the potash sector hurt the broader market but we have not seem too much of a reaction on our market today.

The Aussie market has rallied from the open of trade on the back on a lift in expectation that the RBA will now cut interest rates next week. The Money markets are now pricing in a 93% chance of a 25 basis point cut from the reserve Bank next Tuesday after comment yesterday from the RBA governor delivered his clearest statement yet that super low interest rates are likely to be part of the economic landscape over the coming year.

At lunch in the East the ASX 200 index was up 39 points.

S&P/ASX 200 Financials index helped by positioning ahead of the RBA outcome next week, the sector up 0.9%, the big 4 banks all higher Westpac Banking Corporation (WBC) outperforming the rest up 1.64% to $31.36 and QBE Insurance Group (QBE) also higher. The property sector started off well but has now fallen into the red with Stockland (SGP) off 1.7% and Mirvac Group (MGR) off 1.5%.

Retailers doing well, the big guns Woolies and Wesfarmers higher and Coca-Cola Amatil Limited (CCL) up 1.7%

Overnight, news that the world's largest potash (fertilizer) cartel had fallen apart and this put pressure on overseas fertilizer stocks with the US Mosaic oil down 18% and Canada's Potash also lower. Some analysts overnight suggested the price could from its current US$393 a tonne to around US$300 a tonne. Aussie stocks like BHP Billiton Limited's (BHP) and Incitec Pivot Limited (IPL) were expected to be impacted today. Incitec produces DAP (25% of its current EBIT- Earnings before income tax) a different product but it is still in very similar markets to Potash but should not be largely impacted. The focus has been on BHP as it is currently planning a new potash projects in Canada (Jansen). Jansen is a major project that could cost up to $US15Billion to build. BHP sharre price is slightly lower was slightly lower in early trade.

Late yesterday Qantas Airways Limited (QAN) announced it will raise domestic fares/fuel surcharges by 2-3%. Meaning most long haul International fare/surcharge increases by $30 which we estimate is an increase of about 4-5%. Today QAN share price has fallen 0.4%

In other movements, New Newscorp LLC (NNC) up 3.36% while Twenty-First Century Fox, Inc. (FOX, formerly News Corporation (NWS) lost 0.5%

The Aussie dollar still under pressure this morning on the back of expectations of a rate cut next week. The Australian dollar now worth 0.9037 USc and 0.6814 Euro.

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