MORNING REPORT
(7am AEST)

US personal income fell by 0.1pct in August but spending rose by 0.2pct. The lift in spending was in line with expectations. Meanwhile the Chicago purchasing managers index soared from 56.5 to 60.4 in September while the consumer sentiment index rose from 57.8 to 59.4.

China´s official purchasing managers index rose from 50.9 to 51.2 in September, close to forecasts.

European shares fell on Friday, led lower by banking stocks. Shares in Deutsche Bank lost 9.0pct while Barclays fell 7.7pct. The FTSEurofirst index fell by 1.1pct and lost 16.9pct for the quarter. The German Dax lost 2.4pct on Friday and the UK FTSE fell by 1.3pct.

US sharemarkets fell on Friday. Investors chose to book profits at the end of week, month and quarter despite firmer economic data. The Dow Jones had been easing since the open but it lost 100 points in the last 15 minutes of trade. At the close the Dow was lower by 240pts or 2.2pct with the S&P 500 down 2.5pct and the Nasdaq fell by 2.6pct. Over the week the Dow was actually up by 1.3pct.

US treasuries rose on Friday (yields lower) as the Federal Reserve prepared to embark on ´´Operation Twist´´ - a program that involves buying of longer-dated bonds and sales of short-dated securities. US 2yr yields fell by 2pts to 0.247pct and US 10yr yields fell by 8pts to 1.917pct. Over the week US 2yr yields were up 2pts while US 10yr yields rose by 8pts. US bonds posted their best quarterly gain since 2008 while stocks posted the biggest decline over the same period.

The US dollar rose against major currencies over the European and US sessions on Friday. The Euro fell from near US$1.3560 to US$1.3380, ending the US session near its lows. The Aussie dollar also fell from highs around US97.80c to US96.55c, ending the session near its lows. And the Japanese yen eased from 76.55 yen per US dollar to JPY77.20, ending US trade near JPY77.00.

Global crude oil prices fell on Friday in line with other commodities and equities markets. Some cite weaker economic activity in China as driving the declines while others cite end month and end quarter investment activity. Nymex crude oil fell by US$2.94 or 3.6pct to US$79.20 a barrel and London Brent crude fell by US$1.19 to US$102.76 a barrel. Over the week Nymex oil fell 0.8pct and Brent lost 1.2pct.

Base metal prices fell between 0.5-4.9pct on Friday. Over the week metals fell 2.3-4.7pct except lead, up 2.2pct, and tin, up 0.8pct.The gold price fell in line with other commodities as investors booked profits. The Comex December gold price rose by US30c an ounce on Friday to US$1,622.30. Over the week the gold price fell by $17.50 or 1.1pct while gold fell by 11 per cent In September and rose 8pct over the quarter.

Ahead: In Australia, the Performance of Manufacturing index and Monthly Inflation Gauge are released. In the US, the ISM manufacturing index, auto sales and construction spending data are released.