Australian Stock Market Report – Morning 11/1/13

MORNING REPORT

(7.05am AEDT)

In US economic news, the Chicago PMI surged from 55.7 to 65.9 in October. This was a high since March 2011. The main driver of the jump was a surge in orders from 58.9 to 74.3. Production jumped from 58.0 to 71.1 and employment lifted from 53.2 to 57.7. Initial jobless claims dipped from 350k to 340k in the past week.

European shares were largely flat as disappointing results from heavyweight energy firm Royal Dutch Shell (down 5pct) was offset from strength in the banking and automobile sector. The FTSEurofirst 300 index rose by just 5pts. The German Dax rose by 0.3pct and the UK FTSE fell by 46pts or 0.7pct. Mining shares fell in London trade with BHP Billiton down 1.1pct and Rio Tinto losing 1.3pct.

US sharemarkets were weaker on Thursday as investors focused on earnings results. Exxon Mobile supported the Dow and S&P 500, rising by 1.7pct after reporting adjusted third-quarter earnings that beat expectations. Offsetting the gains Visa lost 3.5pct after reporting a 28pct drop in profit. The Dow Jones fell by 73 points or 0.5pct. The S&P 500 ended lower by 0.4pct while the Nasdaq lost 11pts or 0.3pct.

US treasury prices were mostly flat on Thursday after initially falling, as a surprisingly strong report on Midwest business activity soothed worries about sluggish growth. US 2yr yields fell by 1pt to 0.309pct and US 10yr yields were unchanged at 2.542pct.

The US dollar rose sharply against major currencies as traders continued to respond to the Fed policy statement. The stronger economic data also supported the US dollar. The Euro fell from highs near US$1.3715 to lows around US$1.3550 over European and US trade before ending US trade around US$1.3575. The Aussie dollar fell from highs near US95.25c to lows around US94.55c, ending US trade near its lows. And the Japanese yen held between 98.40 yen per US dollar and JPY98.10, ending US trade near JPY98.35.

World oil prices were slightly weaker on Thursday. Brent fell by US$1.02 or 0.9pct to US$108.84 a barrel while US Nymex fell by US39c or 0.4pct to US$96.38 a barrel.

Base metal prices fell up to 1.8pct on the London Metals Exchange on Thursday with aluminium leading the way. Gold fell sharply as the stronger US dollar weighed on commodity prices. The Comex December futures gold price fell by US$25.60 or 1.9pct to US$1,323.70 per ounce. The iron ore price rose by 70c to US$131.90 a tonne.

Ahead: In Australia, PMI, RP Data/Rismark house price data and Producer Price Index are released. In the US, ISM manufacturing index is released. Chinese manufacturing activity is released.

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