Australian Stock Market Report – Morning 10/12/2011

MORNING REPORT

(7am AEDT)

US chain store sales rose by 4.8 per cent in the latest week compared with a year earlier according to Redbook Research but sales so far in October were down 0.6 per cent on September.

The so-called ´´troika´´ - the International Monetary Fund, European Union and European Central Bank - have agreed that Greece should receive its next 8 billion euro loan tranche in November. But it warns that Greece will need to do more in future to meet targets: ´´it is essential that the authorities put more emphasis on structural reforms in the public sector and more broadly.´´

European shares were generally lower for the first time in five days in thin trade. There was caution ahead of the start of the US earnings season. Miners were mixed with BHP Billiton down 0.4pct in London trade but Rio Tinto rose 0.4pct. The FTSEurofirst index fell by 0.3pct and the UK FTSE lost 0.1pct but the German Dax was up by 0.3pct .

US sharemarkets were mixed leading into the start of earnings season. Alcoa reports results after the bell. The Dow Jones held in a range of -68/+14 points and finished trade lower by almost 17pts or 0.2pct. The S&P 500 was up 0.1pct while the Nasdaq lifted by 17pts or 0.7pct.

US long-term treasuries fell on Tuesday (yields higher) as investors became more hopeful about efforts to deal with the European debt crisis. US 2yr yields rose by 1pt to 0.308pct and US 10yr yields rose by 9pts to 2.157pct.

The Euro and commodity currencies eased against the greenback over the European session but drifted higher in US trade. The Euro rose from lows near US$1.3570 to US$1.3685 and is near US$1.3675 in late US trade. The Aussie dollar also rose from around US99.05c to just below US100c and was trading near US99.90c in late US trade. And the Japanese yen traded in a very tight range between 76.55 yen per US dollar and JPY76.75, ending US trade near JPY76.65.

Global crude oil prices rose modestly on Tuesday. While there was little economic data, supporting prices was news that US authorities broke up an alleged plot to bomb Israeli and Saudi Arabian embassies in Washington and assassinate the Saudi ambassador. Nymex crude oil rose by US40c or 0.5pct to US$85.81 a barrel and London Brent crude rose by US$1.78 to US$110.73 a barrel.

Base metal prices were generally lower on Tuesday as investors squared positions in the absence of market-moving information. Metals fell between 1.3-2.9pct. The gold price fell in line with other metals with the Comex December gold price lower by US$9.80 an ounce to US$1,661.00.

Ahead: In Australia, housing finance data, consumer confidence and Reserve Bank credit and debt card data are released. In the US, the mortgage market index is released.

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