Australian Stock Market Report 05/18/2011
US industrial output was unchanged in April against expectations of a 0.4pct rise. Capacity utilisation eased from 77.0pct to 76.9pct in April. US housing starts fell by 10.6pct in April. Compared to April last year residential construction was down 23.9pct. New building permits fell 4pct in April.
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European shares fell to four week closing lows on Tuesday. The weak economic data was the main driver. The German ZEW index measuring analyst and investor sentiment was lower than expected. The euro zone debt crisis prompted investors to remain cautious. The EU finance minister, Jean-Claude Juncker acknowledged for the first time that Greece may have to move towards a ´´soft restructuring´´ of its debt. The FTSEurofirst index fell by 1pct with the German Dax lower by 1.8pct and the UK FTSE was down by 63pts or less than 1.1pct.
US sharemarkets were mostly weaker for the third straight session on Tuesday. Investors were disappointed by the lack of improvement in the US housing sector and poor earnings guidance. Hewlett-Packard lost 7.3pct after cutting its forecast due to problems in the supply chain due to the Japanese earthquake. Caution dominated trade with the S&P´s industrial sector losing 1.3pct. Both the S&P500 and Nasdaq dipped below their 50-day moving average before buying interest came in. The Dow Jones lost 69pts or 0.6pct with the S&P 500 virtually unchanged and the Nasdaq gained almost 1pt.
US treasuries rose again on Tuesday (yields lower). Weak economic data about the pace of economic growth saw investors continue to switch out of equities and towards safe-haven bonds. US 2yr yields fell by 1pt to 0.52pct and US 10yr yields fell by 3pts to 3.11pct.
The US dollar gave back early gains against major currencies in US trade on Tuesday. The Euro rose from lows near US$1.4125 to US$1.4230, before ending US trade near US$1.4220. The Aussie dollar rose from lows near US105.05c to US106.25c before ending US trade near US106.15c. And the Japanese yen lifted from 81.75 yen per US dollar to JPY81.25, ending US trade near JPY81.40.
US and European crude oil prices fell on Tuesday in a volatile trading session as investors fretted about a slowdown in the US economy. The Nymex crude oil contract fell by US46c or 0.5pct to US$96.91 a barrel and London Brent crude fell by US95c to US$109.99 a barrel.
Base metal prices were mostly weaker on the London Metal Exchange on Tuesday, with the exception of Lead (up 1.1pct). The weakness in US economic data was the main driver, however markets were further pressured in early trade by a firmer US dollar. And the gold price fell again on Tuesday, with Comex gold futures down by US$7.80 an ounce to US$1,482.80.
Ahead: In Australia, consumer sentiment and wage price data are released. In the US, FOMC board minutes are released.
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