Australian Stock Market Report – Midday June 6, 2014

MID-SESSION REPORT
(12.10pm AEST)

The Australian sharemarket is rising for the first time in four trading days, with the All Ordinaries Index (XAO) up 0.4 per cent or 19.7pts to 5,438.8. U.S. stocks finished at record highs ahead of the May jobs report this evening. This is arguably the most highly anticipated piece of data to be released this week.

Overnight, the European Central Bank (ECB) cut rates for the first time in six months. The ECB is focused on applying measures to boost lending and combat deflation. Deflation essentially results in falling prices and wages. It means that consumers and companies could hold off spending money due to the expectation that prices for goods could continue to fall. It could also result in prices being cut by businesses to the point where profitability and competitiveness become an issue. It also makes paying off debt more difficult (debt remains the same but value of money falls).

The miners remain sluggish with the ore price pulling back overnight. Australia's biggest ore producer, RIO is down 0.3 per cent, while Fortescue Metals (FMG) is slumping by 3 per cent after rising 4.2 per cent yesterday. BHP is up 0.06 per cent.

The major banks are improving after three days of losses, which is helping lift the broader market. National Bank (NAB), Commonwealth Bank (CBA) and ANZ Banking Group (ANZ) are all up by around 1 per cent while Westpac (WBC) is 0.75 per cent firmer.

On the economic front, the AIG Construction Index was issued this morning just before market open, rising to 46.7. As expected construction industry activity has improved in May but is still not expanding according to the statistics. A reading below 50.0 indicates industry contraction.

At lunch, 898 million shares have changed hands worth $2.0 billion. 470 stocks are higher, 336 are in the red and 333 are unchanged.

South Korea's sharemarket is closed today due to a public holiday (Memorial Day). South Korea is Australia's fourth biggest two-way trading partner, behind China, Japan and the U.S.

Tonight at 10.30pm (AEST), the non-farm payrolls change will be released in the U.S. This is a measure of how many private and public jobs were added or lost in May. The market is expecting the creation of around 215,000 jobs. The unemployment rate is expected to rise slightly from 6.3 per cent to 6.4 per cent. A much better than expected result could see the U.S. dollar rise and the Australian dollar pull back.

For those trading the Australian sharemarket, the market will be closed on Monday due to the Queen's birthday holiday. Normal trade will resume on Tuesday. International markets will be trading normally.