Australian Stock Market Report – Morning 12/5/13

US MORNING REPORT
(8.00am AEDT)

In US economic news, the ADP employment index showed that 215,000 private sector jobs were created in November, ahead of forecasts for a gain of 173,000. The trade deficit fell from US$42.97 billion to US$41.64bn in October. The ISM services index eased from 55.4 to 53.9 in November. And new home sales rose by 25.4% in October after falling by 6.6% in September.

The Federal Reserve Beige Book indicated that the US economy continued to grow at a ´modest to moderate pace´ while upward pressure on wages and inflation were contained.

European shares fell again on Wednesday as investors tried to make sense of mixed US economic data and whether it could prompt the US Federal Reserve to taper (wind back stimulus). The FTSEurofirst 300 index fell by 0.6%, the German Dax fell by 0.9% and the UK FTSE lost 0.3%. But miners rose in response to higher commodity prices. In UK trade, shares in BHP Billiton rose by 0.9% while Rio Tinto gained 2.0%.

US sharemarkets rebounded from lows on Wednesday on expectations that the Federal Reserve won´t accelerate plans to wind back stimulus. After being down 123pts, the Dow Jones finished down 25pts or 0.2%, while the S&P 500 was down 0.1% but the Nasdaq rose by 0.8pts or less than 0.1%.

US long-dated treasuries fell on Wednesday (yields higher) as investors debated whether the latest economic data meant the Federal Reserve was more likely to wind back stimulus earlier than expected. US 2yr yields were up less than 1 point to 0.293pct and US 10yr yields rose by 5pts to 2.83pct.

The US dollar was mixed against major currencies on Wednesday. The Euro held between US$1.3525 and US$1.3605, and was trading near US$1.3590 in afternoon US trade. The Aussie dollar fell from highs near US90.70c to around US90.00c, and was near US90.30c in afternoon US trade. And the Japanese yen rose from 102.82 yen per US dollar to JPY101.95 and was around JPY102.19 in afternoon US trade.

World oil prices were mixed on Wednesday. US crude rose after the US Energy Information Administration said that domestic crude stocks fell by 5.6 million barrels in the past week. Brent fell after OPEC renewed the 30 million barrels a day production cap for the first half of 2014. Brent crude fell by US74c or 0.7% to US$111.88 a barrel while US Nymex crude rose by US$1.16 or 1.2% to US$97.20 a barrel.

Base metal prices rose up to 2.0% on the London Metal Exchange on Wednesday with aluminium and copper leading the way higher while lead rose just 1.0%. The gold futures price rose in response to bargain hunting with the Comex February futures gold price up by US$26.40 or 2.2% to US$1,247.20 per ounce. And the iron ore price rose by $1.50 or 1.1% to a fresh three-month high of US$139.70 a tonne.

Ahead: In Australia, trade and tourist arrivals data are due. In the US, the weekly jobless claims data is due together with GDP (economic growth), factory orders and the Challenger job layoff series.

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