Australian Stock Market Report – Morning 11/15/13

MORNING MARKET UPDATE
(8.00am AEDT)

Fed Governor Yellen's testimony to the Senate Banking Committee was a relatively dove-ish affair that was roughly in synch with the Fed's official view. Crucially she indicated that the "benefits of QE still exceed the costs" and that the Fed ´´must not remove support while recovery is fragile." This does not suggest any particular urgency to commence tapering and suggests that an announcement will only be made in 2014.

The Bank of England's November Inflation Report contained significant revisions to economic forecasts as had been widely expected. The headline ILO unemployment rate is now expected to fall to the 7pct threshold by the September quarter 2015. Previously this had been late 2016. The BoE President reiterated that it will not "begin thinking of a rate rise before 7pct has been achieved."

European shares rose on Thursday, cheered by solid earnings from French conglomerate Bouygues (up 6.2pct) and Zurich Insurance (up 2.5pct). Central bank commentary suggesting that stimulus was likely to remain in the near term supporting markets. The FTSEurofirst 300 index rose 0.8pct, the UK FTSE rose 0.5pct and the German Dax gained 1.1pct. In UK trade, shares in BHP Billiton rose by 0.5pct while Rio Tinto gained 1.1pct.

US sharemarkets rose to fresh record highs on Thursday as Fed Governor Yellen´s testimony left stimulus expectations intact. However the Nasdaq was under pressure weighed down by Cisco Systems (down 12pct) after reporting disappointing results. At the close of trade, the Dow Jones was up by 55 points or 0.4pct with the S&P 500 up by 0.5pct and the Nasdaq was up by 7pts or 0.2pct.

US treasuries were mixed on Thursday after the auction of $16 billion in 30-year bonds. US 2yr yields fell by 2pts to 0.29pct and US 10yr yields were flat at 2.71pct.

Major currencies were mixed against the greenback in European and US trade on Tuesday. The Euro rose from early lows near US$1.3420 to around US$1.3485, and was near US$1.3455 in afternoon US trade. The Aussie dollar fell from highs near US93.55c to US92.805c, and was holding near US93.20c in afternoon US trade. And the Japanese yen weakened from highs of 99.55 yen per US dollar to JPY100.15, and was holding near JPY100.00 in afternoon US trade.

World oil prices were mixed on Thursday. The Brent crude price rose by US$1.41 or 1.3pct to US$108.53 a barrel. US Nymex crude fell by US12c or 0.1pct to US$93.76 a barrel.

Base metal prices were mixed on the London Metal Exchange on Thursday. Copper ended little changed, near a three month low pressured by growing supply. Gold rose for the first time in six sessions supported by accommodative central bank policy. The Comex December futures gold price rose by US$17.90 or 1.4pct to US$1,286.30 per ounce. The iron ore price rose by US50c to US$136.60 a tonne.

Ahead: In Australia, no economic data is released. In the US, industrial production, and the Empire manufacturing index are released.

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