MORNING REPORT
(7am AEST)

US jobless claims rose by 43,000 to 474,000 last week - marking the highest reading since August. Layoffs in the auto sector due to supply disruptions following the Japanese earthquake were expected to keep the labour market subdued in the near term.

US non-farm productivity slowed from 2.9pct to a 1.6pct annual rate in the March quarter. US ICSC chain store sales rose 8.5pct in April compared to a year earlier. Strength was recorded across a range of sectors from apparel to luxury retailers.

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European shares fell for the third straight day on Thursday. The commodity sell-off accelerated driving mining and energy stocks lower. The STOXX Europe 600 basic resources index lost 0.8. However across the broader market losses were limited after the ECB indicated that interest rates were unlikely to rise in June. The FTSEurofirst index fell 0.3pct while the German Dax gained 3pts and the UK FTSE lost 1.1pct.

US sharemarkets fell on Thursday in response to weaker-thanexpected economic data and the slide in commodity prices. The weak jobless claims numbers drove investors to close out positions ahead of the key payrolls numbers out tonight. The CRB futures index fell 4.9pct and was on track for its biggest weekly fall in over two years. The Dow Jones index fell by 139pts or 1.1pct with the S&P 500 lower by 0.9pct and the Nasdaq was down by 13.5pts or 0.5pct.

US treasuries rose for a fifth straight day in response to weaker equity markets and weaker-than-expected economic data. US 2yr yields fell by 2pts to 0.577pct and US 10yr yields fell by 7pts to 3.154pct.

The US dollar rallied against major currencies on Thursday as the slump in commodity markets prompted investors to flee risky assets. Euro fell from highs US$1.4895 to US$1.4510, before ending US trade near US$1.4525. The Aussie dollar eased from highs near US107.40c to around US105.35c before ending US trade near US105.60c. And the Japanese yen lifted from near 80.50 yen per US dollar to JPY79.55, before closing US trade at JPY80.15.

US and European crude oil prices fell sharply on Thursday in response to softer US economic data. Also weighing on prices was speculation that OPEC will be looking to increase production targets when it meets in June. The Nymex crude oil contract fell by US$9.42 or 8.6pct to US$99.82 a barrel. London Brent crude fell by US$10.39 to US$110.80 a barrel.

Base metal prices fell sharply on the London Metal Exchange on Thursday, as investors sold-out off the entire commodity complex. And the gold price continued to slide driven by the stronger US dollar. The Comex gold futures price fell by US$33.90 an ounce or 2.2pct to US$1,515.30.

Ahead: In Australia, the Reserve Bank releases its Statement on Monetary policy. In the US, payrolls data is released.

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