Australian Stock Market Report – Morning 1/16/14

US MID MARKET MORNING REPORT
(7.00am AEDT)

In US economic news, US producer prices lifted by 0.4% in December to be up just 1.2% over the year. Core producer prices lifted by a more sedate 0.3% in the month. The New York Fed Empire manufacturing survey lifted from 2.2 to a surprising 12.5 in January. The Fed´s latest Beige book, suggest economic activity continued to expand across most regions and sectors through late 2013. Nine out of the 12 districts indicated the local economy was expanding at a moderate pace.

The World Bank raised its 2014 world growth forecast from 3.0% to 3.2%, saying a ´´self-sustaining recovery has begun in richer economies´´. World Bank expects a further strengthening in global growth lifting in 2015 (3.4%) and 2016 (3.5%) forecasts.

European shares climbed to a fresh 5½-year high on Wednesday, buoyed by strong data and a brighter outlook for the global economy. Financial stocks recorded healthy gains after the ECB said lenders will not be required to adjust sovereign debt portfolios they hold to maturity to reflect current market values. The STOXX Euro 600 Banking index lifted by 3.9% and was up 10.7% this year. The FTSEurofirst 300 index rose by 1% with the UK FTSE also higher by 0.8% and the German Dax rose by 2%. Mining shares were higher with BHP Billiton shares up 0.6% in London trade while Rio Tinto rose by 2.7%.

US share markets rallied on Wednesday, on strong earnings and improved data. Bank of America rose 2.7% after reporting that quarterly profit surged by $3 billion as revenue increase and mortgage losses fell. With an hour of trade, the Dow Jones was up by 123 points or 0.8%, while the S&P 500 rose by 0.6% and the Nasdaq gained 33 points or 0.8%.

US treasury prices fell on Wednesday (yields higher), after US producer prices recorded the strongest monthly lift in six months, raising expectations the Fed may bring the forward the tapering timeline. US 2 year were flat at to 0.39% while US 10 year yields rose by 2 points to 2.89%.

The US dollar strengthened against most major currencies on Wednesday. The Euro fell from highs near US$1.3635 to lows near US$1.3580 and was trading around US$1.3605 in late US trade. The Aussie dollar touched lows near US88.85c before lifting to US89.30c, and held near US89.15c in late US trade. And the Japanese yen traded between 104.20 yen per US dollar and JPY104.70 and was trading near 104.55 in late US trade.

World oil prices rose on Wednesday after data showed a large-than-expected drop in inventory levels. US crude oil stockpiles fell by 7.7 million barrels last week. Brent crude rose by US87c or 0.8% to US$107.10 a barrel while US Nymex crude rose by US$1.55 or 1.7% to US$94.14 a barrel.

Base metal prices were higher on the London Metal exchange on Wednesday, with Nickel the best performer, up 1.4%. Gold futures fell on Wednesday. The Comex gold price lost US$7.10 or 0.6% to US$1,238.30 per ounce. The iron ore price rose by US10c to US$129.60 a tonne.

Ahead: In Australia, employment figures are released. In the US, inflation data is released.

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