Australian Stock Market Report – Midday 8/5/13

MID-SESSION REPORT
(12.30pm AEST)

The Australian sharemarket is slipping by 0.3 per cent after 2.5 hours of trade, with the miners and consumer discretionaries the only improvers. Despite today's modest pullback, local stocks have risen by 8 per cent in just six weeks, while the ASX200 has had its longest winning streak since late January.

The monthly retail sales report fell short of market expectations, with no change recorded in spending over June. Consensus was for a 0.3 per cent rise. End of year sales seemed to do little to boost the result, which has pushed the Australian dollar into the red. The monthly TD Securities inflation gauge rose by 0.5 per cent in July, however inflation remains under control.

The market is still pricing in a 91 per cent chance of a rate cut tomorrow at 2.30pm (AEST), when the Reserve Bank (RBA) holds its monthly meeting.

Australia's largest mining company and our market's second biggest listed business, BHP Billiton (BHP) is down 0.3 per cent, while most other resource players are higher. Rio Tinto (RIO) is up 0.53 per cent and is scheduled to release its profit results after market close on Thursday.

Virgin Australia (VAH) downgraded its earnings guidance for 2013, which is pushing VAH 3.3 per cent lower. The country's second largest airline now expects a net loss between $95 million and $110 million. VAH also confirmed that pre-tax costs of the carbon tax over 2013 are estimated to be between $45 and $50 million. VAH said it is unlikely to recoup these costs due to weak economic conditions and competition.

In New Zealand, Fonterra (the world's largest exporter of dairy produce) announced the contamination of 38 tonnes of whey - affected by a bacterium that can cause botulism. New Zealand accounts for a third of globally traded dairy products. There are reports that China and Russia are implementing bans on NZ's dairy products. China buys around a quarter of New Zealand's dairy exports each year.

The NSW bank holiday is keeping investors at bay today. At lunch, only 652.8 million shares have changed hands, worth $1.1 billion. 399 stocks are higher, 369 are in the red while 286 are flat.

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