Australian Stock Market Report – Midday 4/1/14

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Mid-Session Report (12:00 AEDT)

Solid gains on Wall Street overnight have been ignored by local investors on the first day of a new month and quarter. The gains in the US were driven by dovish comments made by Fed Chair Janet Yellen. Ms Yellen gave a speech on Monday defending the Fed´s policy of low interest rates and bond-buying, saying that the ´´extraordinary´´ commitment to stimulus will be needed for some time in the face of the ´´considerable´´ slack in the economy and labour market. Ms Yellen suggested that this ´´view is widely shared by my fellow policy-makers at the Fed´´. The comments quelled concerns that developed last week around the possibility that the Fed was closer to raising interest rates than the markets had originally anticipated. 

In local trade the ASX 200 started the session with a 1 point gain, at its best levels the index was ahead by 6 points before sellers helped the market retreat to trade at a loss of 38 points at the lows of the morning. Volume has been low with a little more than $1 billion traded at lunchtime on the east coast. 

Almost every sector has spent the morning session in the red. As a group miners have been in the red, although of the large bulk miners RIO and FMG have been given something of a fillip after the price of the spot price of Iron ore jumped 4% to $US116.80 per metric tonne. The tentative response to the move in iron ore could be justified in terms of investors waiting for key Chinese manufacturing data due for release in the early afternoon Sydney time.

Elsewhere in the mining sector Lynas Corporation (LYC) rose after releasing an operations update. The group said that commercial production of Rare Earth Oxide (REO) products at the Lynas Advanced Material Plant (LAMP) in Malaysia in the March 2014 quarter was higher than the December 2013 quarter, consistent with guidance provided by Lynas at the end of January 2014. LYC said it had achieved record production of 1089 tonnes of REO for the March 2014 quarter, and that the miner is on track for an 11,000 tonnes p.a run rate during the June 2014 quarter. LYC share were at $0.215 up 2.4 per cent.

The Aussie dollar was firmer ahead of the RBA decision on interest rates due this afternoon at 14:30. The RBA is expected to leave rates on hold although the accompanying statement will be scrutinised closely as always.

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