Australian Stock Market Report – Morning 1/7/14

MORNING REPORT
(8am AEDT)

In US economic news, the ISM non-manufacturing index slipped from 53.9 to 53.0 in December - the slowest expansion in six months. The business activity index was relatively robust at 55.2. The biggest decline occurred in the forward orders index which fell 7 points to 49.4 - the first signs of a contraction since July 2009. US factory orders lifted by 1.8% in November, in line with estimates. Excluding transportation factory orders rose by 0.6%.

European shares were mixed on Monday, as weaker global services data was partly offset by news that Spain´s services sector grew at its fastest pace in over six years. Spain´s IBEX rose by 0.9% supported by the Spanish banking sector. The FTSEurofirst 300 index fell by 0.2% with the UK FTSE flat and the German Dax down 0.1%. Mining shares were weaker with BHP Billiton shares down by 1.6% in London trade while Rio Tinto fell by 3.1%.

US share markets ended a volatile session marginally weaker on Monday. The tech sector recorded the biggest losses after broker downgrades for Twitter (down 5.4%) and EBay (down 3%). Ford shares rose 0.7% after it said it had boosted sales in China by nearly 50% last year, edging past Toyota and Honda. At the close of trade, the Dow Jones was down by 45 points or 0.3% while the S&P 500 was down 0.3% and the Nasdaq fell by 18 points or 0.4%.

US treasury prices rose on Monday (yields lower) after the weaker-than-expected US services sector raised hopes that the Federal Reserve would slow its reduction of bond purchases. US 2 year fell by 2 points to 0.39% while US 10 year yields fell by 4 points to 2.96%.

The US dollar fell against the major currencies on Monday following the weaker service sector data. The Euro rose from lows around US$1.3570 to highs near US$1.3650 and was trading around US$1.3635 in afternoon US trade. The Aussie dollar rose from lows near US89.35c to highs near US89.75c, and held near US89.65c in late US trade. And the Japanese yen rose from lows near 104.85 yen per US dollar to highs near JPY103.95 and was trading near 104.20 in afternoon US trade.

World oil prices were mixed on Monday in choppy trade. Reports of restarted production at a Libyan oilfield was offset by doubts about its ability to reach markets. Brent crude rose by US23c or 0.2% to US$107.12 a barrel while US Nymex crude fell by US53c or 0.6% to US$93.43 a barrel.

Base metal prices were mostly stronger on the London Metal Exchange on Monday, with the exception of Nickel (down 2.1%) and lead (down 0.5%). Copper rose by 0.2% supported by the falling US dollar. The Comex gold futures suffered a sudden but brief drop on Monday. A trade of about 4,200 contracts sent the price tumbling by over US$30 an ounce before recovering to close down just US60c or 0.1% at US$1,238.60 per ounce. The iron ore price fell by US20c to US$134.80 a tonne.

Ahead: In Australia, the trade data is released. In the US, trade data is also released.

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