Australian Stock Market Report – Midday June 4, 2014

MID-SESSION REPORT
(12.10pm AEST)

The Australian sharemarket is falling for the second day and for the fourth time in five trading days. U.S. stocks snapped a three day win streak, giving the market a negative lead today. Despite a 0.5 per cent rise in the iron ore price, the metal's recent weakness has made the miners less attractive to investors.

The mining sector is down 0.5 per cent, taking the losses since the start of this calendar year to 4.84 per cent. A mixture of weak commodity prices and a firm Australian dollar is not ideal for the resources space. Iron ore has slumped by 30 per cent this calendar year due in part to oversupply concerns in China; the world's biggest consumer of the metal and Australia's number one trading partner. The Australian dollar is 30 per cent firmer against the greenback now than it was a decade ago; keeping the miners under selling pressure. BHP Billiton (BHP) is down 0.8 per cent, while the smaller Rio Tinto (RIO) is 0.4 per cent softer.

Rare earth minerals firm Lynas Corp (LYC) is down 4.4 per cent after surging in recent days thanks to successfully raising $40m via investors - helping it buy some time to ramp up production. Oil and gas explorer, Karoon Gas Australia (KAR) is down 3.8 per cent; however is still 41 per cent higher this week thanks to the sale of exploration permits in the Browse Basin to Origin (ORG) for around US$800m.

The financials are down 0.22 per cent, with the major banks all down as much as 0.5 per cent. Commonwealth Bank (CBA) continues to pull back from the all-time high reached a few days ago. Property trust Australand (ALZ) is a standout, up 5.8 per cent after receiving a $2.59bn takeover bid from a Singapore based property developer named Frasers Centrepoint. This beats Stockland's share-swap deal put forward last week.

The Australian economy grew by a better than expected 1.1 per cent between January and March according to the Australian Bureau of Statistics (ABS). This takes annual growth to 3.5 per cent which is higher than the long-term average. The Australian dollar has jumped to US92.7c after hitting a high of US92.99c earlier. The market is still only factoring in a 1 per cent chance of a rate hike next month despite the strong GDP numbers.

At lunch, 923.1m shares have been traded worth $1.66bn. 345 stocks are higher, 421 are lower and 337 are unchanged.