Australian Stock Market Report – Morning 1/15/14

US MID MARKET MORNING REPORT
(7.00am AEDT)

In US economic news, US retail sales rose by a modest 0.2% in December, marginally stronger than the 0.1% forecast. More importantly core sales (excluding autos, gasoline and building materials) rose by a healthy 0.7% in December. Clothing sales lifted by 1.8%, supported by the colder weather, while gasoline sales rose by 1.6% and auto sales fell by 1.8%.

Dallas Fed President Fisher (a 2014 voter), said he will ´´not flinch´´ from his support of tapering the Fed´s large-scale asset purchase program even amid an equity market correction. He spoke in favour of the Fed´s decision to begin tapering last December, though he would have rather had begun tapering with a $20 billion reduction. Fisher commented that he would seek to end QE3 at the ´´earliest practicable date´´.

European shares climbed to a fresh 5½-year high on Tuesday, supported by gains in pharmaceutical stocks and a rebound in US equities. British drug maker AstraZeneca rose by 2.5% after forecasting it would return to growth faster than analysts predict. The FTSEurofirst 300 index rose by 0.2% with the UK FTSE also higher by 0.1% and the German Dax rose by 0.3%. Mining shares were lower higher with BHP Billiton shares down 0.9% in London trade while Rio Tinto fell by 0.3%.

US share markets recovered some of the prior session's losses on Tuesday, supported by strong earning and retail sales data. Both JPMorgan and Wells Fargo posted earnings that beat expectations. With just over an hour of trade left, the Dow Jones was up by 100 points or 0.6%, while the S&P 500 rose by 1% and the Nasdaq gained 66 points or 1.6%.

US treasury prices fell on Tuesday (yields higher), after the marginally better than expected retail sales data and hawkish comments from Fed speakers. US 2 year rose by 1 point to 0.38% while US 10 year yields rose by 4 points to 2.87%.

The US dollar strengthened against most major currencies on Tuesday following the upbeat retail sales data. The Euro touched early lows near US$1.3550 before lifting to highs near US$1.3695 and was trading around US$1.3675 in late US trade. The Aussie dollar fell highs near US90.40c to lows near US89.55c, and held near US89.60c in late US trade. And the Japanese yen traded between 103.25 yen per US dollar and JPY104.15 and was trading near 104.15 in afternoon US trade.

World oil prices were mixed on Tuesday. The rise in Libyan oil production and expectations that Iranian crude will return to market was offset against better US economic data. Brent crude fell by US52c or 0.5% to US$106.23 a barrel while US Nymex crude rose by US79c or 0.9% to US$92.59 a barrel.

Base metal prices were mostly higher on the London Metal Exchange on Tuesday, with the exception of aluminium (down 1.1%) and copper (down 0.8%). Gold futures fell on Tuesday. The Comex gold price lost US$5.70 or 0.5% to US$1,245.40 per ounce. The iron ore price fell by US$1.40 to US$129.50 a tonne.

Ahead: In Australia, consumer sentiment, lending finance and new car sales are released. In the US, the Fed Beige Book is released.

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