Australian Stock Market Report 7/28/2011
US durable goods orders fell 2.1pct in June after a 1.9pct increase in the prior month. Excluding transportation orders rose by a modest 0.1pct. A proxy for business spending - Non-defence capital goods orders excluding aircraft - slipped 0.4pct after a 1.7pct rise in May.
The Fed Beige book - which provides an indication of business activity across 12 central bank districts - suggested that activity levels are slowing. While most districts saw modest gains in hiring, labour markets remained soft. Home prices remain flat to modestly weaker across most districts. On a positive note, price pressures moderated while wages remaining subdued.
European shares fell to one-week closing lows on Wednesday, on ongoing concerns about the US debt ceiling. Banking stocks were the worst performers with the STOXX Europe 600 banking index down 2.1pct. The FTSEurofirst index fell by 1.1pct while the German Dax lost 1.3pct and the UK FTSE fell 1.2pct.
US sharemarkets recorded its biggest one day fall in nearly two months on Wednesday. Investors remained concerned that the US debt ceiling would not be lifted in time to stave off a default. Disappointing earnings results also weighed on markets. A profit warning from Juniper Networks sent its shares down 20.9pct. However Dunkin Brands bucked the trend on its first day of trading jumping almost 50pct. The Dow Jones fell by 199pts or 1.6pct with the S&P 500 down by 2pct and the Nasdaq lower by almost 75pts or 2.7pct.
US treasuries fell on Wednesday (yields higher), as traders focussed on the ongoing possibility that the US credit rating may be downgraded. Compounding the weakness was sluggish demand for a $35 billion auction of 5-year notes. US 2yr yields rose by 5pts to 0.446pct and US 10yr yields rose by 3pts to 2.982pct.
The US dollar rallied against major currencies on Wednesday after the recent sell-off. The Euro fell from highs US$1.4525 to US$1.4340, before closing at US$1.4370. The Aussie dollar eased from near US110.80c to just above US110c, ending US trade near US110.15c. And the Japanese yen weakened from around 77.55 yen per US dollar to JPY78.15, before ending US trade near JPY78.00.
Benchmark crude oil prices fell on Wednesday after a build in oil inventories. US crude stockpiles rose 2.3 million barrels last week against expectations for a fall. Nymex crude oil fell by US$2.19 or 2.2pct to US$97.40 a barrel and London Brent crude fell by US85c to US$117.43 a barrel.
Base metal prices fell on the London Metal Exchange on Wednesday in response to a stronger US dollar and weak economic data. The exception to the weakness was Nickel which gained 1.2pct. And the gold price eased from fresh record highs with Comex gold down by US$1.70 an ounce to US$1,615.10.
Ahead: In Australia, no economic data is released. In the US, data on pending homes sales is released.