Australian Stock Market Report - Morning February 24, 2015

In US economic data, existing home sales fell by 4.9% to a 4.82 million annual rate in January, down from an expected 4.97 million result. The Dallas Federal Reserve manufacturing index fell from minus 4.40 points to minus 11.2 points. And the national activity index rose from minus 0.05 to +0.13 in January.

European shares hit fresh seven-year highs on Monday on expectations that the deal to extend the bailout programme with Greece would be ratified. The German Ifo business climate index hit a seven-month high but fell short of expectations. The FTSEurofirst index rose by 0.7%, but while the German Dax rose by 0.7%, the UK FTSE fell by less than 0.1%, dragged down by a weak profit result by HSBC. Mining shares fell in London with BHP Billiton down by 2.2% while Rio Tinto lost 2.7%.

US sharemarkets eased on Monday as investors booked profits ahead of testimony by the Federal Reserve Chair. At the close of trade the Dow Jones was down by 23.5 points or 0.1% after holding in a 87 point range. The S&P 500 index was down by less than 0.1% while the Nasdaq actually finished higher by 5 points or 0.1% to a 15-year high.

US treasury prices rose on Monday (yields lower). Investors preferred bonds over equities as traders watched Greek debt negotiations and awaited testimony by the Federal Reserve Chair on Tuesday and Wednesday. US 2 year yields fell by 4 points to 0.61% while US 10 year yields fell by 5 points to 2.057%.

The euro and commodity currencies fell against the greenback in European and US trade on Monday. The Euro fell from highs near US$1.1380 to US$1.1295 and was trading near US$1.1335 in afternoon US close. The Aussie dollar fell from highs near US78.40c to US77.80c and was near US77.95c in afternoon US trade. But the Japanese yen strengthened from 119.33 yen per US dollar to JPY118.83 and was near JPY118.88 in afternoon US trade.

World oil prices fell on Monday. The US dollar rose, making more expensive for buyers in Europe. And investors watched developments with the US refinery strike - the biggest in 35 years. The Nigerian oil minister has suggested that there could be an emergency meeting of OPEC oil ministers. Brent crude fell by US$1.32 or 2.2% to US$58.90 a barrel while US Nymex crude fell by US$1.36 or 2.7% to US$49.45 a barrel.

Base metal prices were mixed on Monday. Nickel rose 1.2% and zinc and tin rose up to 0.4% but other metals fell up to 0.4%. Gold fell on Monday on hopes for a stabilisation of the Greek debt concerns. The Comex futures price fell by US$4.10 or 0.3% to US$1,200.80 per ounce. Iron ore was unchanged at US$63.40 a tonne on Monday.

Ahead: In Australia, weekly consumer confidence data is released. In the US, the Federal Reserve Chair, Janet Yellen, delivers

testimony. Data on home prices, consumer confidence, weekly chain store sales are all released together with survey results from

Richmond, Dallas and Texas and the Markit flash services index.

Craig James, CommSec Chief Economist

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