Australian Stock Market Report 22/02/2011
The Markit composite purchasing-managers index for the Euro Zone rose from 57.0 to 58.4 in February - well ahead of expectations and its highest levels since July 2006. The Munich based IFO Institute said its German business confidence index rose from 110.3 to 111.2 in February.
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European Central Bank policymakers have highlighted growing inflation concerns. Speaking in Hong Kong, ECB board member Lorenzo Smaghi said ´´Inflation is higher than expected because of global events... there is pressure on prices of agricultural products and this may not be a temporary phenomenon, it may be a permanent one, the same for energy´´.
European shares fell sharply on Monday after unrest in Libya fuelled concern over energy supplies and sapped investor risk appetite. BP said it had suspended preparations for drilling in Libya. Fresh warnings on inflation from various European Central Bank policymakers added to the negative sentiment. The FTSEurofirst index fell by 1.3pct, the German Dax was lower by 1.4pct and the UK FTSE eased 1.1pct.
US sharemarkets were closed on Monday for the President´s Day public holiday. Last week the Dow Jones and S&P 500 were up 1.0pct and Nasdaq lifted by 0.9pct.
US treasury markets were closed for the public holiday. Last week US 2yr yields fell by 8pts but US 10yr yields fell 5pts.
The Euro rose in overnight trade supported by rising inflationary concerns. The Euro hit early highs near US$1.3705, before falling to lows near US$1.3650 and ending US trade near US$1.3680. The Aussie dollar fell from US101.20c to US100.75c, before ending US trade at US100.90c. And the Japanese yen traded between 83.05 yen per US dollar to around JPY83.20, and ending US trade near JPY83.10.
US crude oil prices recorded its biggest one day rise in over two years in electronic trading. Continued supply concerns about Middle East instability drove prices sharply higher. Libya holds Africa´s largest oil reserves and is the world’s 12th largest oil producer. The Nymex crude oil contract rose by $5.22 or 6.1pct to US$91.42 a barrel in electronic trade. And the London Brent crude rose by US$1.73 to US$104.25 a barrel.
Base metal prices were mostly higher on the London Metal Exchange on Monday. Better than expected Euro Zone data offset further tightening by China policy makers over the weekend. Metals rose between 0.2-1.7pct with the exception being copper down 0.5pct. And the gold price edged higher in electronic trade as a safe-haven alternative, given the Middle East tensions. The Comex gold futures price was up by US$19.10 an ounce to US$1,407.70.
Ahead: In Australia, no major economic data is scheduled. Mirvac, OneSteel and Oil Search are amongst those reporting earnings. In the US, Case-Shiller home price index and Richmond Fed manufacturing index are released.
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