Australian Stock Market Report – Midday November 19, 2014

A man is reflected as he walks past the Australian Securities Exchange building in central Sydney April 8, 2011. Singapore Exchange Ltd has terminated its $8 billion bid for Australia's ASX Ltd after the Australian government formally rejected the offer on national interest grounds and said changes to the country's financial systems were needed before the bourse could be bought by foreigners. REUTERS/Daniel Munoz (AUSTRALIA - Tags: BUSINESS POLITICS)

Sellers test the 5400 level for ASX 200

 In the last two and a half weeks there have been only 3 occasion on which the ASX 200 has risen. The weaker trend was once again in force at the open of trade on Wednesday. While the early losses for the ASX 200 were contained; the index was down 18 points at the low of the session; it appeared clear that sellers were still keen to test the index in terms of support around the 5400 mark. Whether the market holds above this level will be one of the key matters to resolve over the remainder of the week.

 Another theme that has remained in place on Wednesday has been the underperformance of local shares compared to their US and European peers. US stocks rallied overnight with the S&P 500 rising to a record high. At the close of trade the Dow Jones was up by 40 points or 0.2%. The S&P 500 index was up by 0.5% and the Nasdaq was up by 31 points or 0.7%. European shares were boosted by the lift in German sentiment. The ZEW survey showed German analyst and investor sentiment rose from -3.6 to +11.5 in November - marking the first increase in almost a year. The European automotive sector (up 1.5%) was the best performing sector after data showed new car sales in Europe rose 6.2% in October compared with a year ago. The FTSEurofirst 300 index rose by 0.6% with the UK FTSE also up by 0.6% while the German Dax gained 1.6%.

 Miners remained under pressure over the morning with headwinds continuing on several fronts. Rio Tinto (RIO) has received approval from the Environmental Protection Agency (EPA) to develop a new iron ore mine in the Pilbara. At 70 million tonnes a year in capacity, when complete the mine is expected to run for 30 years and by current measures will be the third largest iron ore mine in Australia. RIO's expected Pilbara production for FY'14 is ~270 million tonnes with the new mine not expected to come on line until 2018. On the demand side, weaker data on Chinese home prices played a part in iron ore prices hitting 5 year lows in the last 24 hours - prices were at 4 year lows as of yesterday. Iron ore is down 47% year to date. Fortescue Metals Group (FMG) shares were down more than 5% , Atlas Iron (AIO) fell more than 3%

 On a positive note there were several outperformers in a weaker market. Building products maker James Hardie (JHX) rose after reporting a better than expected half year profit. JHX reported a 7% rise in underlying net profit for the six months to the end of September 30 to $US115.5 million ($A124.97 million) compared to the same period in 2013. Notwithstanding the better result , JHX maintained its full-year profit guidance reflecting a conservative view on the US housing recovery. James Hardie expects a full-year profit of between $US205 million and $US235 million. JHX shares rose 60 cents, or more than 5%, to $12.62.

 The Aussie dollar continued to ease in the face of volatile currency trade. The local dollar fell from highs near US87.45c in the last day to around US86.80 in early Asian trade on Wednesday.

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