Australian Stock Market Report – Midday June 2, 2014

A train hauling carriages filled with iron ore is seen on the outskirts of Port Hedland in the Pilbara region of Western Australia in this December 3, 2013 file photo. If Australian miners are worried about the dramatic decline in iron ore prices, it doesn't show. At an annual gathering of many of the world's biggest and smallest iron ore producers here the mood is upbeat - as if the heftiest one-day fall in ore prices since the global financial crisis never happened. REUTERS/David Gray/Files REUTERS/David Gray/Files

MID-SESSION REPORT
(12.10pm AEST)

Despite a weaker start the Australian sharemarket is creeping higher at lunch. Better than expected Chinese data out yesterday together with a firmer end to the week in the U.S. are helping local stocks. The market is being held back most by the miners, with continued weakness in the iron ore price pushing the sector lower.

BHP Billiton (BHP) is down 1.5 per cent and trading at around a two-month low. Both Rio Tinto (RIO) and Fortescue (FMG) are mixed; however are trading around nine-month lows. RIO is down 0.6 per cent while FMG is up 0.1 per cent. The iron ore price is at a 21-month low; around a 30 per cent drop since 1 January.

The local market's largest industry; the financials are accounting for most of today's gains. The four major banks are up at least 0.5 per cent with CBA hitting a record high today of $82.23.

Markets in China, Taiwan, Hong Kong and New Zealand are all closed today due to holidays.

On the economic front, building approvals fell by a greater than expected 5.6 per cent in April. Approvals are still significantly higher over the past year. Inflation according to the TD Securities Gauge today rose by just 0.3 per cent in May. Company profits are up 3.1 per cent in the March quarter according to the ABS.

At lunch, 684.1m shares have been traded, worth $1.68bn. 435 stocks are higher, 371 are in the red and 310 are unchanged.

The Australian dollar fell from US93c to US92.7c following the worse than expected building approvals read. Continued falls in the iron ore price could cap any significant Australian dollar gains.

Tonight, manufacturing data in Europe and U.S will be in focus.

The start of a new month is always a busy time for markets and economists alike. A barrage of figures will be released over the next five days in Australia, Asia, Europe and the U.S. The focus locally will be on the Reserve Bank's interest rate decision tomorrow, retail sales and the quarterly update on economic growth on Wednesday. The RBA is likely to keep rates steady at 2.5 per cent.

Across the region, the HSBC read on China's manufacturing industry will be a highlight and will add to the weekend's official government release. Holidays in a number of the region's biggest markets this week could keep volume a touch light. South Korea's market will be closed on Wednesday and Friday. In Europe, both the European Central Bank and the Bank of England will be holding their monthly meetings on interest rates on Thursday. In the U.S. the non-farm payrolls report on Friday will be key. This is the most important jobs report issued in North America. Members of the G7 will be meeting in Brussels for a two-day meeting starting Wednesday.