Australian Stock Market Report – Morning 12/18/13

US MORNING REPORT
(8am AEDT)

In US economic news, consumer prices were flat in November but the core rate (excludes food and energy) rose by 0.2%, just ahead of forecasts of a 0.1% gain. The current account deficit narrowed from US$96.61 billion to a 4-year low of US$94.84 billion. Chain store sales were up 2.9% in the latest week on a year ago, compared with 2.6% in the previous week. And the NAHB housing market index rose from 54 to 58 in December.

European shares eased on Tuesday ahead of the US Federal Reserve monetary policy decision. The oil services sector fell the most after a profit warning from a French seismic surveyor. The FTSEurofirst 300 index fell by 0.8% with the UK FTSE down 0.6% and the German Dax was down by 0.9%. Mining shares were mixed with BHP Billiton shares down 0.5% in London trade while Rio Tinto lifted 1.1%.

US sharemarkets eased slightly in thin trade on Tuesday after Monday´s healthy gains. Volatility rose ahead of the Federal Reserve decision with the CBOE volatility index or Vix up 2% to 2-month highs before easing later in the day´s trade to end down 0.5%. Shares in Boeing rose 0.9% after the Board lifted the company´s dividend by 50% and announced a $10 billion share buyback. At the close of trade, the Dow Jones was down by 9 points or 0.1% with the S&P 500 down by 0.3% while the Nasdaq was down almost 6 points or 0.1%.

US treasuries rose modestly on Tuesday (yields lower) as traders positioned ahead of Wednesday´s Federal Reserve decision. US 2 year yields eased 1 point to 0.32% while US 10 year yields fell by 4 points to 2.839%.

The Euro and commodity currencies fell from highs against the US dollar in European and US trade on Tuesday while the Japanese yen rose. The Euro fell from highs near US$1.3780 to around US$1.3725 before trading around US$1.3765 in afternoon US trade. The Aussie dollar fell from highs near US89.50c to around US88.80c, and was near US89.00c in afternoon US trade. And the Japanese yen rose from 103.02 yen per US dollar to JPY102.52 and was near JPY102.62 in afternoon US trade.

World oil prices fell in thin trade on Tuesday, reversing much of Monday´s gains. Brent crude fell by US97c or 0.9% to US$108.44 a barrel while US Nymex crude fell by US26c or 0.3% to US$97.22 a barrel.

Base metal prices rose by up to 0.5% on the London Metal Exchange on Tuesday, the exception being copper down 0.3%. Gold fell on Tuesday, giving back Monday´s gains, with the Comex gold futures price down by US$14.30 or 1.1% to US$1,230.10 per ounce. The iron ore price fell by 60c on Tuesday to US$134.30 a tonne.

Ahead: In Australia, the Reserve Bank Governor testifies to the House Economics Committee. In the US, the Federal Reserve hands down its monetary policy decision.

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