Australian Stock Market Report - Morning
On Friday Chinese authorities raised the Reserve Ratio by 0.50pct to 18.5pct - marking the fifth such rise this year. The tightening step was ´´to strengthen liquidity management and appropriately control money and credit issuance´´. The 50 basis point rise locks up around US$50 billion dollars that banks could otherwise lend.
European shares eased on Friday as China´s tightening triggered concerns about future growth. Commodity stocks fell as energy and base metal prices eased. Banking shares were also weaker as markets waited on further clarity surrounding the Irish bailout package. Germany´s Finance Minister said he could not put a number on the size of the bailout sought by Ireland. The FTSEurofirst index fell 0.5pct, the UK FTSE fell 0.6pctpct and the German Dax rose 0.2pct.
US sharemarkets recorded modest gains on Friday. The Irish bailout uncertainty and Chinese tihgening dominated market activity in early trade with the Dow falling 60 points before recovering in the later part of the session. At the close of trade, the Dow Jones was higher by 22pts, the S&P 500 gained 0.3pct and the Nasdaq rose by 3pts or 0.2pct. For the week the Dow added 0.1pct with the S&P500 and Nasdaq largely unchanged.
US long-dated treasuries rallied (yields lower) on Friday as the Federal Reserve continued its purchase of long-dated debt. Treasuries also received a boost as traders bet on an upward revision to US GDP expected later this week. US 2yr yields were flat at 0.51pct and US 10yr yields fell 2pts to 2.88pct. Over the week US 2yr yields were largely unchanged while US 10yr yields gained 8pts.
The Euro rallied against the US dollar as speculation mounted that Ireland was close to finalising a bailout package. The Euro rose from lows near US$1.3615 to US$1.3730, ending US trade near US$1.3665. The Aussie dollar hit early highs near US99c before falling to US98.15c, and ending US trade near US US98.60c. And the Japanese yen is currently around 83.40 yen per US dollar after trading from JPY83.15 to JPY83.55.
US crude oil prices fell on Friday as traders focused on the Chinese tighening and the likely impact on oil demand. The US dollar weakness provided a degree of support for oil. The Nymex crude oil contract fell by US34 cents to US$81.51 a barrel. For the week oil prices fell 4pct - it´s biggest weekly fall in over three months.
Base metal prices fell on the London Metal Exchange as traders sold positions following further tightening by China to curb inflation. Nickel ended flat, while other metals lost between 0.2pct-2.1pct. Copper fell 2.4pct for the week - its biggest weekly decline in three months. And the gold price eased on Friday, with Comex gold futures down US70 cents an ounce to US$1,352.30.
Ahead: In Australia, no economic data is released. In the US the Chicago Fed national activity index is released.
Newsletter: Subscribe to receive this report daily