Australian Stock Market - Morning 2/3/2011
US ISM manufacturing rose from 60.8 to 61.4 in January - marking the highest reading in seven years. The new orders sub component also hit a seven year high. The employment sub index rose to its highest reading since 1973. US construction spending fell by a larger than expected 0.7pct to its lowest level in five months.
US Federal Reserve Chairman Bernanke downplayed the inflation threat at his testimony to Congress. Bernanke said that the ´´recent rise in commodity prices likely will lead to only a temporary and modest increase in US inflation´´. Bernanke did note that the central bank was seeing ´´more signs of a self-sustaining recover´´ but it won´t be truly established until sustained job creation takes place.
European shares ended lower on Tuesday as the political unrest in the Middle East and North Africa added a degree of uncertainty. Europe´s STOXX banking index fell 1.8pct. The FTSEurofirst index fell by 0.7pct, the German Dax was lower by 0.7pct and the UK FTSE eased by 1pct.
US sharemarkets tumbled on Tuesday as the violence in Libya pushed US oil prices to near US$100 a barrel. Industrial and transport stocks were hit hard on growth concerns. The CBOE volatility gauge surged by 11.7pct. At the close of trade, the Dow Jones index was down 168pts or 1.4pct with the S&P 500 down 1.6pct and the Nasdaq was down 49pts or 1.6pct.
US treasuries rallied in late trade on Tuesday (yields lower) as the weakness in equity markets prompted investors to shift to safe-haven bonds. US 2yr yields fell 4pts to 0.66pct and US 10yr yields fell by 3pts to 3.40pct.
The US dollar recovered against major currencies after sliding in early trade. Bernanke´s testimony to Congress offered no hint that the central banks was considering tightening its loose monetary policy. The Euro fell from highs near US$1.3850 to US$1.3760, and headed into the US close near US$1.3770. The Aussie dollar fell from US101.95c to US101.25c, and was near US101.30c in late US trade. And the Japanese yen strengthened from 82.25 yen per US dollar to around JPY81.80, and was near JPY81.90 in late US trade.
US crude oil prices rallied as the violence in Libya spurred worries that the unrest will engulf other oil producing nations. The Nymex crude oil contract rose by US$2.66 or 2.7pct to US$99.63 a barrel - its highest close since September 2008. And the London Brent crude rose by US$3.58 to US$115.38 a barrel.
Base metal prices were mostly weaker on the London Metal Exchange, as investors sentiment waned given the fresh unrest in Libya. And the gold price rose to fresh record highs, supported by safe-haven flows. The Comex gold futures price rose US$21.30 to US$1,431.20 an ounce.
Ahead: In Australia, December quarter GDP data is released. In the US, the Federal Reserve Beige book is released.
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