MORNING REPORT
(7am AEDT)

The US ISM services index eased slightly from 53.3 to 53.0 in September but remained over the 50 line indicating expansion of the services sector. New orders rose from 52.8 to 56.5. The ADP employment index showed that private sector jobs rose by 91,000 in September, above forecasts for a 75,000 gain. But planned job layoffs stood at 115,730 in September - a 2-year high.

The German Chancellor has opened the door to bank recapitalisations: ´´The German government - as the finance minister has made very clear in the last two days - stands ready to implement such a capitalisation of the banks if it is needed.´´

European shares rose for the first time in four days after German Chancellor Angela Merkel said that her government was prepared to discuss bank recapitalisations. The FTSEurofirst index rose by 3.3pct with the German Dax higher by 4.9pct while the UK FTSE gained 3.2pct.

US sharemarkets rose on Wednesday with investors encouraged by latest economic data and signs that European leaders were more determined to deal with debt problems. Shares in Yahoo! rose by 8pct on rumours of a takeover offer from Microsoft. The Dow Jones closed higher by 131pts or 1.2pct with the S&P 500 up 1.8pct and the Nasdaq rose by 55 points or 2.3pct.

US long-term treasuries eased further on Wednesday (yields higher) in response to stronger equities and commodities markets. The next action in the ´´Operation Twist´´ program occurs on Thursday. US 2yr yields were flat at 0.26pct and US 10yr yields rose by 6pts to 1.89pct.

The Euro and commodity currencies rose against the US dollar over the European and US sessions. The Euro traded between US$1.3280 and US$1.3380, ending the US session near US$1.3340. The Aussie dollar rose from lows around US95.30c to US96.60c, ending the US session near US96.50c. And the Japanese yen held between 76.60 yen per US dollar and JPY77.00, ending US trade near JPY76.70.

US crude oil prices posted solid gains on Wednesday. US economic data was better than expected, equities rose, the US dollar softened and US crude oil inventories unexpectedly fell last week. Nymex crude oil rose by US$4.01 or 5.3pct to US$79.68 a barrel and London Brent crude rose by US$2.94 to US$102.73 a barrel

Base metal prices were little changed on Wednesday as traders prepared for the release of US employment data on Friday. Nickel fell 1.9pct but tin rose 0.5pct with copper up 0.3pct. And the gold price rebounded in line with the oil price and a weaker greenback. The Comex December gold price rose by US$25.60 an ounce or 1.6pct, settling at US$1,641.60.

Ahead: In Australia, tourism arrivals and car sales data is released. In the US, data on weekly jobless claims is released.