MORNING REPORT
(7am AEST)

The ISM manufacturing index rose by from 52.4 to 53.4. Across the sub-indices production jumped to from 55.3 to 58.3 , the new orders balance dipped from 54.9 to 54.5 and the employment reading rose from 53.2 to 56.1, a 9-month high.

US construction spending fell 1.1pct to an annual rate of $808.86 billion, a 7-month low. The result was well below forecasts which centred on a rise of 0.6pct. Spending in January was revised to show a much bigger 0.8pct fall instead of the previously reported 0.1pct dip.

European shares recorded their biggest daily gain on Monday, as investors focused on the upbeat manufacturing data from the US and China. The STOXX basic resources index rose 2.3pct. In London BHP gained 3pct while Rio Tinto rose 3.2pct. Euro zone banks were modestly weaker after media reports claimed that Germany´s Bundesbank had stopped accepting the bonds of Portugal and other peripheral economies - the report was later denied. The FTSEurofirst 300 index rose 1.5pct. The German Dax rose by 1.6pct on Friday and the UK FTSE rose 1.9pct.

US sharemarkets started the second quarter on a positive footing, following the relatively upbeat economic data. The S&P 500 lifted to a four-year high as energy and material stocks were once again in favour. At the close, the Dow Jones was up by 52pts or 0.4pct with the S&P 500 up by 0.8pct and the Nasdaq rose 28pts or 0.9pct.

US treasuries rallied on Monday (yields lower) as bargain hunters moved in following the Friday´s selloff. US 2yr yields were lower by 1pt to 0.33pct and US 10yr yields fell by 4pts to 2.18pct.

The greenback eased against commodity currencies on Monday, following the upbeat Chinese and US manufacturing data. However the Euro eased against the US dollar as the Eurozone PMI contracted for the eight straight month. The Euro fell from highs around US$1.3375 to near US$1.3275, and was close to US$1.3325 in late US trade. The Aussie dollar rose from lows near US103.65 to highs around US104.45c and was near US104.20c. And the Japanese yen strengthened from 83.00 yen per US dollar to JPY81.90 and was near JPY82.10 in late US trade.

Benchmark crude oil prices rose for a second straight session on Monday. The upbeat ISM manufacturing data supported the bid for commodities. In addition loading delays for North Sea crude cargoes added to concerns about global supply disruptions. The US Nymex rose by US$2.21 or 2.1pct to US$105.23 a barrel while London Brent crude rose by US$2.55 to US$125.43 a barrel.

Base metal prices were higher on Monday with copper posting its biggest one-day gain in six-weeks. The more upbeat Chinese manufacturing data eased traders concerns that China was slowing rapidly. Copper and Zinc both gained 2.4pct while Nickel rose 2.3pct. The gold price rose on Monday in line with other commodities and equities. The June Comex gold price was up by US$7.80 or 0.5pct to US$1,679.70 an ounce.

Ahead: In Australia, retail trade figures are expected. While the Reserve Bank issues its interest rate decision. In the US, factory orders, FOMC minutes and vehicle sales are released.