Australian Stock Market Report – Morning 1/14/14

US MID MARKET MORNING REPORT
(7.00am AEDT)

European shares climbed to a fresh 5½-year high on Monday, supported by a rally in banking stocks, after regulators agreed to soften new leverage ratios for banks. On Sunday global banking regulators said they would modify the way the new bank rule, which is meant to rein in risky balance sheets from 2018 is compiled. Deutsche Bank climbed 4.7%, Barclays added 2.9% and UBS rose 3.1%. The STOXX banking index rose 1.5% (up 6% so far this year). The FTSEurofirst 300 index rose by 0.3% with the UK FTSE also higher by 0.3% and the German Dax rose by 0.4%. Mining shares were higher with BHP Billiton shares gaining 0.9% in London trade while Rio Tinto rose by 1.2%.

US share markets fell to session lows in afternoon trade on Monday in a broad-based decline. Investors waited on the corporate earnings results to gauge how companies are faring, given mixed view on the economy. All 10 S&P sectors were lower. Energy shares led the falls following the oil price lower. Pharmaceutical gain Merck bucked the trend (up 6.6%), after a preliminary US Food & Drug Administration review said the company´s experimental blood clot-preventing drug Vorapaxar should be approved. JPMorgan and Wells Fargo are both slated to report results on Tuesday. With an hour of trade left, the Dow Jones was down 145 points or 0.9%, while the S&P 500 fell by 1.1% and the Nasdaq lost 53 points or 1.3%.

US treasury prices rallied on Monday (yields fell to three week lows), as investors reduce bullish expectations for economic growth after the weaker-than-expected jobs report on Friday. US 2 year fell 2 points to 0.36% while US 10 year yields fell by 3 points to 2.82%.

The US dollar continued its fall against most major currencies on Monday, with the exception of the Euro. The soft jobs data dampened expectations of aggressive Fed tapering. The Euro fell from highs US$1.3680 to lows near US$1.3635 and was trading around US$1.3670 in late US trade. The Aussie dollar rose from lows near US90.25c to highs near US90.85c, and held near US90.65c in late US trade, a one-month high. And the Japanese yen traded between 103.60 yen per US dollar and JPY102.80 and was trading near 102.85 in afternoon US trade.

World oil prices fell on Monday, following news of a deal between Iran and the West to curb the Iranian nuclear program, to take effect from January 20. Resumption of production from a key North Sea oilfield added to the weakness. Brent crude fell by US53c or 0.5% to US$106.72 a barrel while US Nymex crude fell by US92c or 1% to US$91.80 a barrel.

Base metal prices were higher on the London Metal Exchange on Friday. Nickel was the best performer (up 2.6%) after Indonesia introduced a ban on a range of mineral ores including Nickel. Gold futures lifted supported by the weaker US dollar. The Comex gold price lifted by US$4.20 or 0.3% to US$1,251.10 per ounce. The iron ore price rose by US20c to US$130.90 a tonne.

Ahead: In Australia, no economic data is released. In the US, advanced retail sales and business inventories are expected.

[Kick off your trading day with our newsletter]