Australian Stock Market Report - Morning 11/04/2011

MORNING REPORT (7am AEDT)

US ISM non-manufacturing index eased modestly from 53.0 to 52.9 in October. A reading above 50 indicates the sector is expanding. Business activity, new orders and exports remained healthy.

US factory orders rose 0.3pct in September ahead of forecasts which expected a 0.1pct fall. Orders for non-defence capital goods ex aircraft (seen as a measure of business confidence and spending plans) jumped 2.9pct in September.

European shares recorded healthy on Thursday following news that a Greek referendum on the bailout package may not take place. In addition the European Central Bank surprised markets by cutting its refi rate by 0.25pct to 1.25pct at its board meeting. ECB President Draghi presided over his first post-meeting press conference and confirmed that it was a unanimous decision. Draghi did indicate that some of the downside risks to growth that have been highlighted in the past are now starting to materialise and added that "significant cuts to growth forecasts are likely." The FTSEurofirst index rose 1.9pct with the UK FTSE up 1.1pct and the German Dax gained 2.8pct.

US sharemarkets rallied on Thursday supported by news that Greece has backed away from a referendum. A better than expected read on US jobless claims (down 9k to 397k in the last week) also supported sentiment ahead of the non-farm payrolls numbers tonight. The Dow Jones rose by 208pts or 1.8pct and the S&P 500 up 1.9pct while the Nasdaq rose 58pts or 2.2pct.

US long-dated treasuries eased on Thursday (yields higher) as the ECB rate cut and improvement in US labour market supported the bid for risk assets. US 2yr yields were flat at 0.238pct and US 10yr yields rose by 8pts to 2.065pct.

The Euro rallied against the US dollar despite the ECB rate cut as investors focused on the optimism regarding Greece. The Euro rallied from levels near US$1.3650 to US$1.3855 and ended US trade near US$1.3820. The Aussie dollar rose from lows around US102.00c to US104.35c, but ended US trade near US104.15c. And the Japanese yen traded in a tight range between 77.80 yen per US dollar and JPY78.15, ending US trade near JPY78.10.

Crude oil prices rallied on Thursday supported by the surprise ECB rate cut. Nymex crude oil rose by US3$1.56 or 1.7pct to US$94.07 a barrel and London Brent crude rose by US$1.49 to US$110.83 a barrel.

Base metal prices were mostly stronger on the London Metals Exchange on Thursday as the weaker US dollar and the ECB rate cut supported buying. The exception was Nickel which lost 0.8pct. Other metals rose between 0.4-2.2pct. And the Comex December gold price finished up by US$35.50 an ounce to US$1,765.10 - a six week high.

Ahead: In Australia, the RBA Statement on Monetary Policy is released. In the US, non-farm payrolls are released.

Savanth Sebastian, CommSec Economist

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