Australian Stock Market Report – Midday November 11, 2014

Specialist Geoffrey Friedman reacts to the Dow Jones industrials average passing 17,000 on the floor of the New York Stock Exchange July 3, 2014. The Dow industrials broke above the 17,000 milestone on Thursday and the S

ASX 200 eases in early trade

 Local shares started the second session of the week much like the first, in reverse. The path of the ASX 200 to the session lows was orderly and took the first hour at which point the market was down by 16 points. As lunch approached there appeared to be little evidence that buyers were keen to make any impression and the index loitered within sight of the worst levels of the morning. The lead offered by US share markets didn't translate to sentiment at the open locally. The Dow Jones and the S&P 500 traded modestly higher on Monday in the absence of major corporate or economic news. The Dow Jones was up by 40 points or 0.2%, the S&P 500 index was up by 0.3% and the Nasdaq was up by 19 points or 0.4%. One of the features of the US session was Toll Brothers, the largest U.S. luxury homebuilder, which reported a 29% lift in quarterly revenue in response to strong housing demand.

 As far as the ASX sectors were concerned, Financials regained their composure after Monday's losses which were informed by Westpac (WBC) going ex-dividend. At lunch WBC was ahead by 0.3% having lost almost 4% yesterday. The NAB and ANZ continued in a weaker vein, shedding 0.3%.. Insurance stocks were weaker in general with QBE Insurance (QBE) and Insurance Australia Group (IAG) each shedding in the range of 0.5%, while Suncorp (SUN) was down by almost 1%

 In the resource sector the pendulum changed directions for the mining and energy stocks after some support off discounted levels in recent days. Crude oil prices resumed their recent slide driven by continuing surplus concerns. The Kuwaiti oil minister said that he doesn't expect OPEC to cut output at the cartel's next meeting on 27 November. Crude oil prices were also influenced by expectations that Libya is expected to resume oil production at two of its major oilfields in coming days. Oil Search (OSH) shares were down 2.2% and Woodside Petroleum fell 1.2%.

 Fertiliser and explosives maker Incitec Pivot (IPL) announced a 33% in full year net profit due to $247.1 million. The result was driven more than $109 million in write-downs. Excluding the impairments, there was a 21% rise in net profit to $356.3 million. The shares however rose as investors focussed on earnings, which grew across all the Australian businesses. Earnings in the explosives business before interest and tax rose 14% to $370.5 million, led by sales growth in its Moranbah ammonium nitrate plant in Queensland. Earnings at the fertiliser division increased by nine per cent to $183.4 million. The outlook for 2015 will see continued headwinds according to management with challenging market conditions in the resources and agricultural sectors. However the CEO said IPL's performance would benefit from continued improvements in manufacturing performance and the productivity delivered through its Business Excellence initiative. IPL shares were ahead by 3.5%

 The Aussie dollar rose on news that Australian business conditions jumped by a record amount in October reflecting an sales and profits, but it came with caveats about the durability of the recovery. National Australia Bank's business conditions index rose by 12 points to 13 points, the biggest one-month rise in the history of the survey, which began in 1998. At the same time the Business Confidence Index fell by 1 point to 4 points over the same period. The NAB said that the jump in Australian business conditions points to strong start to Q4 but growth was still constrained by weak terms of trade, soft labour market and signs of a softening in building cycle. The Aussie dollar was trading at 86.4 US cents at lunchtime.

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