Australian Stock Market Report – Midday July 8, 2014

Recession in 2014? Why Experts are Predicting a Stock Market Crash in 2014 — Traders work at the Post that trades Ally Financial Inc. following the IPO on the floor of the New York Stock Exchange April 10, 2014. Reuters/Brendan McDermid

MID-SESSION REPORT
(12.15pm AEST)

The Australian sharemarket is falling for the second day, with sluggish performances offshore last night not helping. The All Ordinaries Index is down 0.1 per cent and is flirting with the key 5500pt mark.

The NAB Business Confidence Survey results were issued this morning and highlight the slightly better conditions and improved sentiment across the Australian business community. The business confidence index rose to a reading of +8. A number above 0.0 indicates optimism.

Commodity prices were mostly softer overnight, which is dragging our miners lower at lunch. Iron ore producer Fortescue Metals (FMG) is one of the hardest hit as it is more sensitive to ore price moves than the larger BHP Billiton (BHP) and Rio Tinto (RIO). FMG's breakeven price for iron ore sits at around US$72 per tonne; almost US$30 per tonne more than RIO or BHP. FMG shares are down 2.4 per cent and 23.7 per cent this calendar year. BHP is down 0.5 per cent today and 1.3 per cent this year while RIO is flat today and down 8.6 per cent since 1 January.

The major banks are mixed, with Commonwealth Bank (CBA) up 0.1 per cent while Westpac (WBC), National Bank (NAB) and ANZ are down by as much as 0.8 per cent. The financial sector is up 4.7 per cent this calendar year; outperforming the broader market by 2 per cent.

Online travel business Wotif.com (WTF) is down 0.3 per cent after its 24.5 per cent surge on Monday. A $700 million takeover offer from U.S. travel giant Expedia yesterday pushed the underperforming stock higher. The bid comes at a time when WTF has struggled on the market since a profit downgrade in December.

Gaming company Aristocrat Leisure (ALL) is down 2.4 per cent with investors unimpressed by its $1.4 billion purchase of a U.S. competitor. Qantas (QAN) is down 0.2 per cent and announced 167 engineering job cuts as part of its cost cutting plans. Earlier this year Australia's biggest airline stated its intention to cut 5,000 jobs as part of its $2 billion cost reduction program.

The Australian dollar is firmer and currently buys US93.8c.

At lunch, 917.6 million shares have changed hands worth $1.4 billion. 430 stocks are up, 384 are lower and 308 are unchanged.