Australian Stock Market Report
Wednesday 22, May 2013

SummaryCloseMovement% Change
All Ordinaries5142.10-14.10-0.30
All Industrials5165.40-14.70-0.30
50 Leaders5324.60-14.80-0.30

Market Turnover
 		$A 5,841,136,306.00

Commentary

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With the exception of the first half hour of trade, sellers dominated the session on Wednesday. The news pulse in corporate and economic terms provided further encouragement.

Financials were the main weight on the index today. Not helping the atmosphere around the lenders were figures showing a bigger than expected decline in consumer confidence. According to Westpac and The Melbourne Institute, confidence fell by 7% in May. There were several noteworthy points in the survey, amongst them; the May decline was the biggest in 17 months and the index fell below 100 for the first time since October 2012. Whilst confidence fell across the country on a state by state basis, what stood out was the strength of sentiment in relation to purchasing a dwelling. For example, in WA confidence fell 11% although the measure of whether it was a good time to buy a dwelling rise by a substantial 22%. The same measure increased by more than 13% in NSW, 11% in SA and more than 8% in QLD. Encouragingly, attitudes to buying property are being helped by low rates and the recent rate cut from the RBA. The big four banks were all lower by the order of 1% despite improving sentiment towards purchasing property.

Profit downgrades have been a feature of the retail space in recent weeks. Evidence on a number of fronts has been suggestive of a tightening of household spending in general. Today’s anecdote supporting this view was provided by weaker than expected quarterly sales numbers from Myer (MYR) whose shares lost 3.2%

TEN Network shares continued their retreat losing almost 2% today having shed 8% yesterday. Market speculation has turned around the possibility that a stakeholder has been looking to sell down their interest in the broadcaster.

All eyes will turn to Washington later this morning local time (after 12:30am AEST) for Fed Chairman Bernanke’s testimony to the Joint Economic Committee on the US economic outlook. While he is expected to acknowledge that the economy and labour market are improving, we do not expect any meaningful shift away from the current official FOMC line in relation to continued open ended QE.

Tom Piotrowski
Market Analyst

MIDDAY REPORT
(12pm AEST)

The Australian share market is trading slightly lower in the early session, despite record highs being reached on Wall Street overnight. The US Dow Jones Index made it 19 consecutive Tuesday wins, while the broader share market and NASDAQ Indices were higher for the 9th consecutive Tuesday.

Locally, we are seeing weakness from financial players which is weighing on the overall market. Shares in the ANZ (ANZ) are off by 1.3 per cent.

Seven West Media (SWM) which yesterday announced Tim Worner as its incoming CEO, has dipped by almost 9 per cent to $2.075 after confirming that US private equity firm KKR has sold its 12 per cent $265 million stake in the media company. A mix of institutional and professional investors bought the stake at $2.21 per share, a three per cent discount to yesterday’s close.

Myer Limited (MYR) has today reported its third quarter sales numbers. They were up 0.5 per cent in the 13 weeks to April 27 to $652.5 million. The result was slightly below expectations and MYR shares are down 2.2 per cent in the early session to $2.71.

In economic news today, the Westpac/Melbourne Institute index of consumer sentiment fell by 7.0 per cent in May to 97.6. The index is up 2.4 per cent over the year. All five components of the index fell in May: The estimate of family finances compared with a year ago fell by 8.0 per cent; The estimate of family finances over the next year fell by 7.0 per cent; Economic conditions over the next 12 months fell by 13.4 per cent; Economic conditions over the next 5 years fell by 6.9 per cent; The measure on whether it was a good time to buy a major household item fell by 1.3 per cent.

The Australian dollar remains below parity against the greenback but could receive an uptick tonight when US Federal Reserve President Ben Bernanke testifies before Congress in Washington. It’s widely expected he won’t announce a winding back of the QE3 program.

Enjoy your day.

Juliette Saly
CommSec Market Analyst

MORNING REPORT
(7am AEST)

In UK economic news headline CPI inflation dropped from 2.8pct to 2.4pct in April compared with a year ago. Annual core CPI (excluding food & energy) fell to 2.0pct in April. Transport costs were a major driver of the fall in inflation, these in turn were influenced by lower petrol prices.

European shares rose to fresh five-year highs on Tuesday supported by a slew of upbeat corporate reports. However concerns about a possible end to US bond buying limited gains. Retail stocks received a boost after British retailer Marks & Spencer (up 6.2pct) reported a smaller than expected fall in profit and some signs of a turnaround. Burberry (up 5.3pct) also reported upbeat results. The FTSEurofirst 300 index rose by 0.1pct with the German Dax up 0.2pct to a new record high while the UK FTSE was up by 0.7pct. Mining shares were higher with BHP Billiton up by 3pct in London trade while Rio Tinto gained 2.6pct.

US sharemarkets rallied to fresh record highs on Tuesday. St. Louis Fed President Bullard spoke in Frankfurt and hosed down expectations of a pullback in stimulus. He added that the US recovery had been disappointing and he could not see a good case for tapering stimulus unless inflation increases. New York Fed president Dudley echoed similar sentiment. The Dow Jones rose for the 19th consecutive Tuesday up by 52pts or 0.3pct. The S&P 500 rose 0.2pct while the Nasdaq rose by almost 6pts or 0.2pct.

US treasuries rallied on Tuesday (yields lower) with traders attracted by the higher yields on offer. In addition two voting Fed members struck a more dovish tone, supporting treasuries. US 2yr yields fell by 1pt to 0.24pct and US 10yr yields fell by 3pts to 1.93pct.

The US dollar fell against the Euro on Tuesday after comments from Federal Reserve members hosed down expectations of an end to stimulus. The Euro rose from lows near US$1.2845 to highs US$1.2930 before ending US trade near US$1.2905. The Aussie dollar rose from US97.50c to highs near US 98.35c and ended US trade near US98.05c. And the Japanese yen traded between 102.85 yen per US dollar and JPY102.25, ending US trade at JPY102.45.

World crude oil prices fell for the first time in five sessions on Tuesday, however losses were limited by the weakening US dollar late in the session. Brent crude fell by US89c or 0.8pct to US$103.91 and US Nymex crude fell by US55c or 0.6pct to US$96.16 a barrel.

Base metal prices were weaker in London trade on Tuesday, after disappointing Chinese import figures. China´s April refined copper imports fell 33pct from a year ago. And the gold price gave back some of the prior session´s gains. The Comex June futures price fell by US$6.50 an ounce or 0.5pct to US$1,377.60 per ounce. And the iron ore price rose by US60c or 0.5pct to US$123.60 a tonne.

Ahead: In Australia, consumer sentiment is released. Also the Bureau of Resources & Energy Economics releases its semi-annual listing of major projects. In the US existing home sales and FOMC minutes are released. Federal Reserve Chairman Bernanke testifies to Congress.

Savanth Sebastian
CommSec Economist

This commentary is a general account of the day's trading and is not intended to be taken as a recommendation to buy, hold or sell any particular stock.