Australian Stock Market Report 06/09/2011
The US Federal Reserve Beige book suggested that economic activity across the 12 reported Fed districts generally continued to expand albeit at a slower pace in May. The pace of manufacturing growth slowed in a number of districts, while the higher food and energy prices affected consumer willingness to spend. The report highlighted the gradual improvement in labour markets, while wage growth was modest.
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European shares fell for a sixth straight day on Wednesday. Investors fretted about the strength of the global economic recovery in light of Fed Chairman Bernanke´s bearish comments (yesterday) on the US economic recovery. Sovereign debt issues also dominated attention after a letter from Germany´s finance minister to the ECB was released by a German newspaper. The letter pointed out that Greece needs substantial fresh aid to avoid being the euro zone´s first state insolvency. The FTSEurofirst index fell by 0.9pct, the German Dax lost 0.6pct, and the UK FTSE fell 1pct.
US sharemarkets fell for a sixth straight session on Wednesday, as investors continued to digest Fed Chairman Bernanke´s downbeat assessment of the US economy. The Dow Jones fell by 21pts or 0.2pct with the S&P 500 down by 0.4pct and the Nasdaq lost 26pts or 1pct.
US treasuries rallied (yields lower) on Wednesday as investors continued to switch out of equities and into safe haven bonds. Even a warning from ratings agency Fitch, that the US would not be able to maintain its AAA sovereign rating if it suffered even a ´´technical´´ default on its debt, failed to dampen demand. US 2yr yields fell 2pts to 0.38pct and US 10yr yields lost 5pts to 2.95pct.
The US dollar recovered some of its recent losses against major currencies on Wednesday, as global growth concerns fuelled demand for safe-haven currencies. The Euro fell highs near US$1.4685 to US$1.4564, before ending US trade near its lows. The Aussie dollar fell from highs near US106.80c to near US105.90c before ending US trade near US106.15c. And the Japanese yen held between 80.05 yen per US dollar and JPY79.70, ending US trade near JPY79.90.
Crude oil prices rose on Wednesday after OPEC failed to reach a deal to increase output. The lack of an increase in output raised fears of supply shortages later this year. Saudi Arabia´s oil minister described the meeting as ´´one of the worst ... ever´´. The Nymex crude oil contract rose by US$1.65 to US$100.74 a barrel. And London Brent crude rose by US$1.07 to US$117.85 a barrel.
Base metal prices were mixed on the London Metal Exchange on Wednesday. Copper was the biggest drag falling by 1.2pct on concerns about the US economic recovery. And the gold price fell on Wednesday with Comex gold futures down by US$5.30 an ounce to US$1,538.70.
Ahead: In Australia, employment data is released. In the US, trade data and wholesale inventories are released.
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