Australian Stock Market Report - Morning 08/02/2011
The US ISM manufacturing index slumped to a 2-year low of 50.9 in July, down from 55.3 in June. All major components of the index were weaker expect exports. But US construction spending hit a six month high in June, rising 0.2pct.
US politicians were preparing to vote on the bipartisan budget deficit deal agreed with the White House. The House of Representatives was expected to vote on Monday evening with the Senate vote to occur shortly after.
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European shares fell sharply on Monday with weak US economic data serving to offset investor relief about a deal between the US Congress and White House on the budget deficit and debt ceiling. The FTSEurofirst index fell by 1.3pct, the German Dax slumped by 2.9pct, the French CAC lost 2.3pct and the UK FTSE fell by 0.7pct.
US sharemarkets ended slightly weaker in volatile trade on Monday. The Dow Jones rose 139 points at the start of trade as investors celebrated a likely end to the debt crisis. But the Dow Jones then slumped 284 points to be down 145 points after the release of the ISM data. At the close of trade the Dow Jones was lower by almost 11pts or 0.1pct with the S&P 500 down by 0.4pct and the Nasdaq was lower by 11.8pts or 0.4pct.
US long-term treasuries rose on Monday (yields lower) following the weak reading on US manufacturing. US 2yr yields were little changed at 0.375pct and US 10yr yields fell by 5pts to 2.75pct.
The Euro and commodity currencies eased in European trade but drifted higher over the US session. The Euro fell from highs near US$1.4450 to US$1.4185, ending the US session at US$1.4250. The Aussie dollar fell from highs near US110.65c to US109.25c, ending US trade near US109.65c. And the Japanese yen strengthened from 77.75 yen per US dollar to JPY76.35, before easing and ending US trade near JPY77.20.
Benchmark crude oil prices ended mixed in volatile trade on Monday as US politicians prepared to vote on the budget deficit/debt ceiling deal. Oil prices rose early in the session but fell away after the release of weak US economic data. But supply disruptions in the North Sea provided support for oil prices. Nymex crude oil fell by US81c or 0.8pct to US$94.89 a barrel but London Brent crude rose by US7c to US$116.81 a barrel.
Base metal prices fell on the London Metal Exchange on Monday in response to weaker US economic data and a stronger greenback. Metals fell up to 1.9pct with copper faring worst. And the gold price fell on Monday from record highs as investors trimmed their bets on safe-haven assets. Comex December gold fell by US$9.50 an ounce or 0.6pct to US$1,621.70.
Ahead: In Australia, the Reserve Bank Board meets to set interest rates. Data on building approvals and the ABS house price series are released. In the US, personal income/spending data is released together with auto sales.
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