Australian Stock Market Report - Morning 11/03/2011

MORNING REPORT (7am AEDT)

The ADP Employment Survey showed that the US private sector added 110,000 jobs in October. The result was ahead of forecasts and all the job gains came from small and medium sized businesses. In addition September job gains were revised higher from 91,000 to 116,000.

The US Federal Reserve kept interest rates unchanged after its latest FOMC meeting. The accompanying statement included a few minor changes, mostly reflecting the acceleration in growth in the third quarter. However the new set of downwardly revised GDP growth and inflation forecasts have opened the door slightly to more policy easing. GDP growth is now expected to be between 1.6pct-1.7pct in 2011, and 2.5pct-2.9pct in 2012.

European shares recorded healthy gains in a relief rally on Wednesday. Germany and France have demanded clarity from Greece on the bailout plan and the next round of aid is expected to be held back until the referendum. The economic data was soft, with the Euro-zone manufacturing PMI revised down to 47.1 from the 47.3 flash estimate. The FTSEurofirst index rose 1.1pct with the UK FTSE up 1.2pct and the German Dax gained 2.3pct.

US sharemarkets rallied on Wednesday as the upbeat private sector jobs report supported sentiment and investors bought up downtrodden stocks. Energy and financial recorded healthy gains. The Dow Jones rose by 178pts or 1.5pct and the S&P 500 up 1.6pct while the Nasdaq rose 33pts or 1.3pct.

US long-dated treasuries eased on Wednesday (yields higher) as the US Fed confirmed that US growth had strengthened ´´somewhat´´ in the third quarter. US 2yr yields fell by 2pt to 0.226pct and US 10yr yields rose by 1pt to 1.996pct.

The Euro rallied against the US dollar in a volatile session overnight snapping a three day losing streak. The Euro rallied from levels near US$1.3710 to US$1.3825 and ended US trade near US$1.3730. The Aussie dollar fell from highs around US104.20c to US102.80c, but ended US trade near US103.30c. And the Japanese yen traded in a tight range between 78.15 yen per US dollar and JPY77.95, ending US trade near JPY78.10.

US crude oil prices rose for the first time in four sessions on Wednesday. However gains were limited by a larger than expected 1.83 million barrel build in US crude inventories. Nymex crude oil rose by US32c or 0.3pct to US$92.51 a barrel and London Brent crude fell by US20c to US$109.34 a barrel.

Base metal prices were mostly stronger on the London Metals Exchange on Wednesday as the upbeat employment report and slightly optimistic view by the Fed supported buying. The exception was Nickel which lost 0.1pct. Other metals rose between 0.9-2.1pct. And the Comex December gold price finished up by US$17.80 an ounce to US$1,729.60.

Ahead: In Australia, retail sales and the PSI are released. In the US, the ISM non-manufacturing index and factory orders are released.

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