MORNING REPORT
(7am AEDT)

The US ISM manufacturing index rose from 50.6 to 51.6 in September, well above expectations centred on a result near 50.5. Production, employment and supplier deliveries all rose strongly. Construction spending rose by 1.4pct in August after falling by 1.3pct in July. And US car makers posted double-digit annual gains in sales in September with GM sales up 20pct and Chrysler up 27pct.

Greece reported on late Sunday night that the 2011 budget deficit would hit 8.5pct, above the target of 7.6pct. The 2012 budget is projected at 6.8pct versus the 6.5pct target. The IMF said on Monday that further adjustment is necessary.

European shares fell again on Monday after Greece indicated that it will miss deficit targets, raising fears that bail-out funds will be withheld. The FTSEurofirst index fell by 1.2pct with the German Dax lower by 2.3pct while the UK FTSE lost 1.0pct.

[Kick off your trading day with our newsletter]

US sharemarkets fell on Monday with worries about the European debt crisis swamping better-than-expected economic data. Shares in American Airlines parent, AMR fell 32pct on bankruptcy fears. At the close the Dow was lower by 258pts or 2.4pct with the S&P 500 down 2.9pct and the Nasdaq fell by 3.3pct.

US treasuries rose on Monday (yields lower) as concerns about the European debt crisis dragged equities lower, prompting investors to embrace government bonds. The Federal Reserve also began its ´´Operation Twist´´ program with a US$2.5 billion purchase of 25-30yr bonds. Further purchases of long-term debt is planned for Thursday. US 2yr yields were down 1pts to 0.239pct and US 10yr yields fell by 15pts to 1.766pct.

The US dollar lifted against the Euro and commodity currencies during the US session on Monday tracking declines on equities markets. The Euro fell from highs near US$1.3380 to US$1.3190, ending the US session near US$1.3200. The Aussie dollar also fell from highs around US96.70c to US95.40c, ending the session US95.65c. And the Japanese yen strengthened from 77.05 yen per US dollar to JPY76.55, ending US trade near JPY76.65.

US crude oil prices fell to 12-month lows on Monday on the on-going worry that the European debt crisis will lead to lower economic activity and less demand for oil. Nymex crude oil fell by US$1.59 or 2.0pct to US$77.61 a barrel and London Brent crude fell by US$1.05 to US$101.71 a barrel

Base metal prices were generally higher on Monday, the exceptions being lead and zinc which fell modestly. The price of nickel soared 8.1pct after Norilsk - the world´s largest producer - said 10pct of the world´s nickel producers are losing money and could cut output in the fourth quarter. And the Comex December gold price rose US$35.40 an ounce or 2.2pct to US$1,659.50.

Ahead: In Australia, the Reserve Bank Board meets. Trade and building approvals data are released. In the US, Federal Reserve chairman Ben Bernanke delivers testimony on the economy. Data on factory orders is released.

More from IBT Markets:
Follow us on Facebook.
Follow us on Twitter.
Subscribe to get this delivered to your inbox daily