Australian Stock Market Report – Morning 12/3/13

MORNING REPORT
(8.00am AEDT)

In US economic news, the ISM manufacturing index lifted from 56.4 to a 31-month high of 57.3 in November, above forecasts for a result near 55.0. Construction spending rose by 0.8%, above forecasts tipping a 0.4% rise.

In European economic news, the Eurozone purchasing managers index lifted to 51.6 in November, up from 51.3 in October and the flash estimate of 51.5.

European shares fell on Monday. Shares in German steelmaker Thyssenkrupp fell 8.5% after failing to find a buyer for its Brazilian mill. The utilities sector eased after the Spanish Finance Ministry withdrew financing for the electricity sector. And British retailers fell after rating downgrades by major brokers. The FTSEurofirst 300 index fell 0.3%, the German Dax eased less than 0.1% and the UK FTSE lost 0.8%. In UK trade, shares in BHP Billiton fell by 2.0% while Rio Tinto lost 0.9%.

US sharemarkets were weaker on Monday. While investors were encouraged by stronger economic data, this also could mean that the Federal Reserve starts to wind back monetary stimulus. Shares in retailers were softer after the National Retail Federation estimated the average shopper spent $407.02 over the weekend, or 3.9% less than a year ago. At the close, the Dow Jones was down 78 points or 0.5%, while the S&P 500 was down 0.3% and the Nasdaq was down 14pts or 0.4%.

US long-dated treasuries fell on Monday (yields higher) in response to stronger-than-expected economic data. US 2yr yields rose by less than 1pt to 0.289pct and US 10yr yields rose by 5pts to 2.80pct.

The US dollar rose against major currencies on Monday in response to solid economic data. The Euro fell from highs near US$1.3615 to US$1.3525, and was trading near US$1.3535 in afternoon US trade. The Aussie dollar fell from highs near US91.65c to US90.85c, and was near US91.00c in afternoon US trade. And the Japanese yen eased from 102.35 yen per US dollar to JPY103.13 and was around JPY102.96 in afternoon US trade.

World oil prices rose on Monday with strong manufacturing readings in China, the US and Germany offsetting a firmer US dollar. A stronger greenback makes dollar-denominated commodities more expensive for European and Asian buyers. Brent crude rose by US$1.76 or 1.6% to US$111.45 a barrel while US Nymex crude rose by US$1.10 or 1.2% to US$93.82 a barrel.

Base metal prices fell up to 1.3% on the London Metal Exchange on Monday with copper and tin leading the way but nickel was flat. The gold futures price fell on Monday in response to a stronger US dollar with the Comex February futures gold price down by US$28.50 or 2.3% to US$1,221.90 per ounce. The iron ore price rose by 40c or 0.3% to US$136.80 a tonne on Monday.

Ahead: In Australia, the Reserve Bank Board meets. Retail trade, government finance and balance of payments data are due. In the US, auto sales and weekly chain store sales data are released.

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