Australian Stock Market Report - Morning 01/20/2012
The US consumer price index was unchanged in December. Excluding food & energy prices rose by 0.1pct. The Philadelphia Fed index rose from 6.8 to 7.3 in January. Across the key sub indices new orders and shipments were weaker. US jobless claims fell by 50,000 to a seasonally adjusted 352,000 - the lowest level since April 2008.
Spain auctioned €6.61 billion of bonds of maturities 4-10 years. There was clearly no absence of demand for Spanish paper and the total value was comfortably above the maximum target of €4.5b. In its first auction since being stripped of its AAA credit rating France auctioned €7.8b of notes at significantly lower yields than in late 2011. Germany sold €3.44b of euros of 2-year bonds at a yield of 0.17pct. Portugal sold €2.5b of 3-month, 6-month and 11-month bills. Encouraging yields achieved were all below 5pct.
European shares surged higher as solid European bond auctions eased concerns about sovereign funding costs. Banking stocks lead the gains with the Euro zone banking index up 7.4pct. The FTSEurofirst index rose by 1.1pct with the UK FTSE up by 0.7pct and the German Dax up by 1pct.
US sharemarkets rallied on Thursday on an array of positive developments including healthy euro bond auctions, and stronger than expected earnings from the likes of Morgan Stanley (up 5.2pct) and Bank of America (up 1.6pct). At the close, the Dow Jones was up 45pts or 0.4pct, with the S&P 500 up 0.5pct and the Nasdaq rose by 19pts or 0.7pct.
US long-term treasuries rallied on Thursday (yields higher) as encouraging news on the economy and European debt auctions led investors to favour equities over bonds. US 2yr yields were flat at 0.24pct and US 10yr yields rose by 7pts to 1.98pct.
The euro rallied against the greenback in overnight trade following the healthy demand for sovereign bond auctions across Europe. The Euro rose from lows near $1.2835 to around US$1.2945 and was near US$1.2955 in late US trade. The Aussie dollar held between near US103.70c and US104.35c, and was near US104.15c in late US trade. And the Japanese yen eased from 76.65 yen per US dollar to JPY77.30, and was near JPY77.15 in late US trade.
US crude oil prices fell on Thursday pressured by continuing weak demand. European Union ambassadors failed to agree on details of a plan to embargo crude imports from Iran. The US EIA inventory data showed a 3.44 million barrel draw down last week. Nymex crude oil fell by US20c or 0.2pct to US$100.39 a barrel while London Brent crude rose by US89c to US$111.55 a barrel.
Base metals were higher on Thursday with trading boosted by the improving sovereign debt environment in Europe and stronger US data. Copper climbed 1.6pct to a four-month high, while Nickel posted the strongest gain, up 3.6pct. And the gold price fell from five-week highs. The Comex February gold price lost US$5.40 an ounce or 0.3pct to US$1,654.50 an ounce.
Ahead: In Australia, data on export and import prices is released. In the US, data on existing home sales is released.