Australian Stock Market Report – Midday November 26, 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)

Buyers Return

 The market volatility that has been a recent staple for local shares continued on Wednesday. The ASX 200 opened with a gain of 4 points before rallying to an improvement of 56 points at the morning highs. Thereafter the index consolidated within sight of the best levels of the day. The early improvements locally came despite flat results for European and US indices in the last 12 hours. European shares rose on Tuesday but gains in bank stocks were offset by weakness in resources. The FTSEurofirst 300 index rose by 0.2%, the German Dax lifted by 0.8% while the UK FTSE edged 1.4 points higher or less than 0.1%.

 Stocks on Wall St were mixed overnightdespite US GDP for QIII being unexpectedly revised up to 3.9% in annualised terms, bringing the annual rate of growth to 2.4%. On the other side of the coin, the US consumer confidence index fell from 94.1 to 88.7 in November, well short of forecasts centred on a reading near 96.0. Elsewhere, the Case Shiller home price index rose by 0.3% in September to be up 4.9% over the year. US Fed regional surveys were mixed: the Richmond Fed index eased from +20 to +4 in November but the Dallas Fed services index rose from +14.0 to +25.4.

 In a fashion similar to Monday, every sector measured by the ASX was trading higher led by the materials sector. Mining stocks were generally higher despite mixed commodity markets. Base metal prices fell by up to 1% on the London Metal Exchange in the last day with copper and tin leading the declines. Iron ore prices continued to ease in the last day retreating by US$1.40 to US$68.60 a tonne. Rio Tinto (RIO) shares were ahead by more than 2% , BHP Billiton (BHP) was up by 1.1% while Fortescue Metals Group was up by 0.2 %.

 Shares in Mount Gibson (MGX) were placed in a trading halt as ongoing problems at its Koolan Island mine haunt the junior iron ore miner. The main pit of its mine in Western Australia's Kimberley region has been undergoing repair work for the last month. On Wednesday the group said that work had been interrupted by a further slump in the pit's seawall. As a result mining has remained suspended as a precautionary measure. The shares will remain in a trading halt until Friday at the Latest. MGX announced previously that the repair work might take three months and cost up to $10 million. MGX shares last traded at 41 cents. Consumer related stocks enjoyed solid support despite a cautionary note being sounded by Webjet (WEB). The group expects the domestic leisure travel market to remain flat for the rest of this financial year. WEB expects pretax earnings of $27 million for this financial year, compared with $23 million previously. The latest expectations include $1 million in costs attributed to the acquisition of SunHotels in Europe. WEB shares were down 1.7%

 In economic news the ABS reported that the value of construction work done fell in the third quarter. The total value of construction, including building and engineering, work fell by 2.2% from the second quarter. The value of residential and non-residential building work completed fell by 1.0% in the same period, while for engineering construction it dropped by 3.2% for the fourth consecutive quarterly fall. Residential construction fell by 1.6% in the third quarter, detracting somewhat from the view on house building and its contribution to the economic recovery next year. Much of the fall in engineering construction is linked to a sharp slowdown in mining investment at the tail-end of the resources boom.

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