Australian Stock Market Report – Morning 10/25/13

MORNING REPORT
(7.05am AEDT)

The US trade deficit came in at $38.8 billion in August, roughly in line with that recorded in July. The underlying trend remains of very gradual narrowing of the deficit. Initial jobless claims dipped further down by 12,000 to 350,000 last week. Flash US manufacturing fell from 52.8 to 51.1 in October. Output declined for the first time in four years, with the subindex dipping to 49.5.

European shares climbed towards five-year highs on Thursday, thanks to strong corporate results and encouraging manufacturing data from top metals consumer China. Autos was the top-performing sector, rising 1.7pct after Germany´s Daimler (up 3.3pct) lifted its forecasts after than a better-than-expected third quarter. The FTSEurofirst 300 index rose by 0.5pct with the UK FTSE up by 0.6pct and German Dax higher by 0.7pct. Mining shares in London were higher with BHP Billiton up by 1.4pct while Rio Tinto rose by 0.5pct.

US sharemarkets rose on Thursday, as mixed economic data increased expectations of prolonged monetary stimulus. Home builders recorded strong gains after PulteGroup said a slowdown in new home orders would be ´´short-lived´´. Its shares jumped 7.3pct and D.R Horton rose by 3.2pct. The Dow Jones rose by 96pts or 0.6pct. The S&P 500 rose 0.3pct while the Nasdaq gained 22pts or 0.6pct.

US long-term treasuries rose on Thursday (yields lower) as expectations grew that the Federal Reserve is still months away from tapering its bond buying program. US 2yr yields rose by 1pts to 0.307pct and US 10yr yields fell by 1pt to 2.516pct.

The US dollar fell to a two-year low against the Euro on Thursday as mild concerns about the outlook for the US economy and monetary policy dominated sentiment. The Euro rose from lows near US$1.3765 to highs near US$1.3820 and ended US trade around US$1.3800. The Aussie dollar reached early highs near US96.70c before easing to around US95.75c, ending US trade near US96.15c. And the Japanese yen traded between 97.60 yen per US dollar to JPY97.25, ending US trade near JPY97.30.

World oil prices were mixed on Thursday, as traders bet that the spread between Brent and WTI had widened by too much. Brent crude fell by US81c or 0.8pct to US$106.99 a barrel, while US Nymex rose by US25c or 0.3pct to US$97.11 a barrel.

Base metal prices rose on the London Metals Exchange on Thursday. Initially copper dipped to its lowest levels in nearly two weeks as China´s Central Bank declined a cash injection for the third day. However the better than expected Chinese flash manufacturing read prompted buyers. Gold prices hit fresh five-month highs on Thursday. The Comex December futures price rose by US$16.30 an ounce or 1.2pct to US$1,350.30 per ounce. The iron ore price rose by US30c to US$133.50 a tonne on Thursday.

Ahead: In Australia, no economic data is released. In the US, durable goods orders and the University of Michigan confidence figures are released.

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