Australian Stock Market Report - Morning 11/01/2011

MORNING REPORT (7am AEDT)

The Chicago purchasing managers index eased from 60.4 to 58.4 in October, just short of forecasts centred on a result near 59.0. But the employment index rose from 60.6 to 62.3. The Dallas Fed manufacturing index improved from minus 14.4 to +2.3 in October. But the New York ISM index eased from 538.0 to 534.9 in October.

The OECD expects G20 countries to grow by 3.8pct in 2012 after expanding by 3.9pct this year.

European shares closed lower on Monday as a rash of worries prompted investors to book profits at the end of the month. News that US broker, MF Global, had filed for bankruptcy unnerved investors, while there were on-going concerns about the health of the Italian economy. The FTSEurofirst index fell by 1.8pct with the UK FTSE lower by 2.8pct while the German Dax fell by 3.2pct. The FTSEurofirst index rose by 8.3pct in October - the best gain since July 2009.

US sharemarkets fell as investors booked profits after a solid month of gains. The Dow Jones fell for the first time in six days, falling by 276pts or 2.3pct with the S&P 500 down 2.5pct while the Nasdaq lost 53pts or 1.9pct. The Dow rose 9.5pct for the month with the S&P 500 up 10.8pct.

US treasuries rose again on Monday (yields lower) as investors booked profits in equities and commodities markets and embraced higher yields in the bond market. US 2yr yields fell by 5pts to 0.25pct and US 10yr yields fell by 18pts to 2.13pct.

Major currencies were mixed over US and European sessions on Monday. Investors squared positions and booked profits at the end of the month while also responding to Bank of Japan´s intervention to weaken the yen in Asian trade. The Euro eased from levels near US$1.4050 to US$1.3830 and ended US trade near US$1.3840. The Aussie dollar rose from lows around US105.00c to US106.10c, but ended US trade near US105.30c. And the Japanese yen strengthened from 79.50 yen per US dollar to JPY77.80, ending US trade near JPY78.15.

Crude oil prices fell modestly on Monday as investors booked profits following strong gains over the month. Nymex crude oil fell by US13c or 0.1pct to US$93.19 a barrel and London Brent crude fell by US35c or 0.3pct to US$109.56 a barrel. Over October Nymex crude soared by 17.7pct - the biggest gain since May 2009. Brent rose by 6.6pct.

Base metal prices were generally softer on the London Metals Exchange on Monday as investors adjusted positions at the end of the month. Metals fell between 0.4-2.3pct but zinc gained 0.8pct. And the Comex December gold price finished down by US$22 an ounce to US$1,725.70. Gold rose 6.3pct in October.

Ahead: In Australia, the Reserve Bank Board meets to decide interest rate settings. In the US, the ISM manufacturing index, construction spending and auto sales figures are released. The Federal Reserve meets for the first day of a two-day meeting.

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