Australian Stock Market Report – Midday September 11, 2014

Local shares fall despite job gains

 The Australian market is adding to Wednesday's losses, with a sharp drop in the unemployment rate, subdued Chinese inflation and a positive lead from Wall Street not enough to inspire local markets. The All Ordinaries Index (XAO) is down 0.2 per cent, adding to Tuesday's 0.6 per cent slide. After interrupted trade across the region due to holidays, all major markets are trading normally today which is likely to see volumes return to normal.

 121,000 jobs were added in August while the unemployment rate fell more sharply than expected from 6.4 per cent to 6.1 per cent. While there was an increase in both full-time and part-time employment, the huge beat in the headline result was driven by part time jobs. 106,700 part-time jobs were added while only 14,300 full-time jobs were created over the month. Australia's jobless rate now matches that of the US. Keep in mind that in July 300 jobs were lost and the unemployment rate hit a 12-year high; the data has recently been volatile. While the equities market didn't react in a big way to, the Australian dollar initially shot up to US92.1c only to fall back to US91.8c by 12.20pm (AEST).

 Australia's largest department store chain Myer (MYR) is down 8.5 per cent after reporting a weaker than expected annual profit result and a 31 per cent cut in its dividend. FY14 profit fell by 23 per cent to $98.5m for the 12 months to July 26. Total sales for the year were largely flat and a 5.5cps dividend was declared. MYR partly blamed significant investment in the business for theweaker result. MYR which has recently been a substantially shorted company is down 17.6 per cent this year.

 Pharmaceuticals distributer Sigma (SIP) is down 3.6 per cent following the release of its half-year earnings. Despite posting a 37.5 per cent jump in net profit to $22.4m, SIP has decided to temporarily suspend its dividend payments due to a lack of franking credits. On Monday, SIP announced the $26.7m acquisition of DDS (Discount Drug Store) adding 121 pharmacies to the Sigma network.

 The mining sector remains under pressure falling by 0.45 per cent. The S&P/ASX 200 Materials Index (a measure of mining sector performance) is down 2.84 per cent in September after falling by 3.92 per cent in August. Note that the industry shot higher by 7.7 per cent in July. Iron ore prices have continued to fall; with BHP Billiton (BHP) down 0.5 per cent and Fortescue Metals (FMG) down 2.1 per cent. FMG makes almost all its money from selling ore to China and has a higher breakeven cost than BHP and Rio Tinto (RIO).

 At lunch, 1.07bn shares have been traded worth $2.6bn. 398 stocks are up, 402 are down and 360 are unchanged.

 The Australian dollar buys US91.8c.

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