Australian Stock Market Report - Morning

European shares rallied of three month lows on Monday, boosted by bargain hunting. Energy stocks received a boost from the higher crude oil price. Banking stocks rebounded after earlier losses. The FTSEurofirst index rose by 0.7pct with the UK FTSE higher by 0.6pct and the German Dax up 0.9pct.

US sharemarkets were weaker after a volatile session. Worries over the euro zone´s fiscal health continued to weigh on markets, offsetting a host of broker upgrades. Financial and banking stocks came under pressure as the market waited on Federal Reserve Chairman Bernanke´s testimony in front of the House Financial Service committee, later this week, where it is believed he will outline the Fed´s ´´exit strategy´´. At the close, the US Dow Jones index was lower by 103 points or 1.0pct with the S&P 500 down 9pts and the Nasdaq was lower by 15pts or 0.7pct.

US treasuries rallied in late trade on Monday (yields lower) in a flight to quality as equity markets weakened. US 2yr yields fell by 1pt to 0.77pct with US 10yr yields rose 1pt to 3.57pct.

The Euro and commodity currencies rallied against the greenback in overnight trade. The Euro recouped some of last weeks losses, rising from lows near US$1.3625 to near US$1.3710, ending US trade near US$1.3670. The Aussie dollar rose from lows near US86.35c to US87.10c, ending US trade near US86.45c. And the Japanese yen hit early lows near 89.55 yen per US dollar to JPY89.20, ending US trade near JPY89.30.

US crude oil prices edged higher on Monday as the weaker US dollar provided support for the oil price. An unexpected cold front in the US has driven speculation that the demand for US heating oil could rise in the coming week. The Nymex crude oil contract rose by US$0.70 to US$71.89 and London Brent crude rose by US$0.06 to US$69.65 a barrel.

Base metal prices rallied on the London Metal Exchange on Monday as bargain hunting and short covering drove prices higher. The weakness in the greenback, further supported commodities across the board. Zinc rallied 4.3pct with other metals higher between 1.3-2.7pct. And the price of gold rose by US$13.40 an ounce to US$1,066.20.

Ahead: In Australia, NAB Business Confidence is released. In the US, wholesale inventories is scheduled for release. Earnings results are expected from Alumina, Bradken, Cochlear, David Jones, Macquarie Group and Singapore Telecom.