Australian Stock Market Report – Morning 1/13/14

US MORNING REPORT
(6.50am AEDT)

In US economic news, non-farm payrolls lifted by just 74,000 in December, the smallest rise in three years. The unemployment rate fell from 7.0% to 6.7% - the lowest in over five years. US wholesale inventories rose by 0.5% after a revised 1.3% rise in October - suggesting that restocking would contribute to December quarter GDP.

European shares climbed to a fresh five year high on Friday, before giving back some of the gains following the weaker than expected US jobs report. Stocks were boosts by strong corporate updates. German Airline Lufthansa gained 8.9% after reporting a rise in December passenger traffic and forecasting a shrinking 2014 fuel bill. Luxury goods were in demand after the world's largest watchmaker, Swatch (up 3.9%), reported rising sales and forecast double-digit 2014 growth. IWC watches and Richemont, the maker of Cartier both lifted by 4%. The FTSEurofirst 300 index rose by 0.4% with the UK FTSE higher by 0.7% and the German Dax rose by 0.6%. Mining shares were higher with BHP Billiton shares rose 0.5% in London trade while Rio Tinto rose by 0.8%.

US share markets were decidedly mixed on Friday after the weaker-than-expected jobs report raised fresh concerns about the strength of the labour market. Defensive stocks led the gains with the Utilities and the Telco sector bid higher. Homebuilding stocks benefited from falling US yields. Lennar added 2% while the largest US home builder D.R. Horton added 1.8%. At the close of trade, the Dow Jones was down 8 points or 0.1%, while the S&P 500 rose by 0.2% and the Nasdaq gained 18 points or 0.4%. Over the week the Dow Jones fell 0.2% and S&P 500 gained 0.6% while the Nasdaq rose by 1%.

US treasury prices rallied on Friday (yields lower), as the employment data showed the weakest jobs growth in three-years. US 2 year fell 6 points to 0.37% while US 10 year yields fell by 11 points to 2.86%. Over the week US 2 year yields fell by 2 points and US 10 year bond yields fell by 11 points.

The US dollar fell against major currencies on Friday, following the disappointing jobs report. The Euro rose from lows around US$1.3535 to highs near US$1.3685 and was trading around US$1.3670 at the close of US trade. The Aussie dollar rose from lows near US88.85c to highs near US90.05c, and held near US89.95c in late US trade. And the Japanese yen traded between 105.05 yen per US dollar and JPY103.85 and was trading near 104.00 in afternoon US trade.

World oil prices rose on Friday, reversing the two prior sessions of losses, with traders covering short positions. Brent crude rose by US92c or 0.9% to US$107.25 a barrel while US Nymex crude rose by US$1.06 or 1.2% to US$92.72 a barrel.

Base metal prices were higher on the London Metal Exchange on Friday. Nickel was the best performer (up 3.9%) supported by the weaker US dollar. Gold futures lifted with the Comex gold price up by US$17.50 or 1.4% to US$1,246.90 per ounce. The iron ore price fell by US30c to US$130.70 a tonne.

Ahead: In Australia, housing finance and job advertisements are released. In the US, no economic data is expected.

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