Australian Stock Market Report - Morning 13/01/2011

US import prices rose by 1.1pct in December with export prices up 0.7pct. Both results were in line with forecasts.

The US Federal Reserve Beige Book reported that manufacturing and retail spending improved across all Fed districts over November and December but residential real estate markets remained weak.

The Bank of China has started to allow US customers to trade the Chinese yuan. Overnight, US Treasury Secretary Timothy Geithner again called on China to raise the value of the yuan more quickly.

European shares hit fresh 28-month highs on Wednesday as investors were comforted by strong demand for Portugal´s debt. And mining stocks rose in response to higher metal prices. In London trade shares in BHP Billiton were up 1.2pct with Rio Tinto up 2.2pct. The FTSEurofirst index rose by 1.5pct, with the UK FTSE higher by 0.6pct while the German Dax rose by 1.8pct. In Spain the benchmark IBEX 35 was up 5.4pct with Portugal´s sharemarket up 2.6pct.

US sharemarkets rose on Wednesday. Investors were encouraged by the solid debt auction in Portugal while agriculture stocks rose in response to higher food prices. With an hour of trade to go, the Dow Jones index was higher by 86pts or 0.7pct with the S&P 500 up 0.8pct while the Nasdaq was up by 18pts or 0.7pct.

US treasuries were flat on Wednesday. Investors moved away from bonds to equities and commodities but losses halved after an auction of US 10-year notes met with strong demand. US 2yr yields were unchanged at 0.597pct and US 10yr yields rose by 1pt to 3.35pct.

Major currencies rose against the US dollar after an encouraging auction of Portuguese debt caused investors to move away from safe-haven assets like the greenback. The Euro rose from lows near US$1.2960 to US$1.3135, and was heading into the US close near the highs. The Aussie dollar lifted from lows around US98.40c to US99.60c, and was near US99.55c in late US trade. And the Japanese yen rose from near 83.45 yen per US dollar to JPY82.85, and was around JPY82.90 in late US trade.

US crude oil prices rose to 26-month highs on Wednesday in response to production delays and data showing a sharp drop in US crude stocks. The Nymex crude oil contract rose by US75c or 0.8pct to US$91.86 a barrel. Brent crude rose by US41c to US$98.02 a barrel.

Base metal prices posted solid gains on the London Metal Exchange on Wednesday as investors again embraced growth-dependent assets like equities and commodities. Nickel was up 4.5pct while zinc rose 3.1pct and lead lifted 2.6pct. And the gold price rose in line with other commodities with the Comex gold futures price higher by US$1.50 an ounce to US$1,385.80.

Ahead: In Australia, employment & unemployment figures are released. In the US, data on producer prices and international trade is released.

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