Australian Stock Market Report – Morning 1/9/14

MORNING REPORT
(8am AEDT)

In US economic news, the ADP National Employment Report showed the private sector added 238,000 jobs in December - the fastest pace in 13 months. Analysts are looking for around 200,000 jobs to be added on Friday´s non-farm payrolls number.

The FOMC minutes, suggested that several Fed members were concerned about tapering while unemployment remained high. Members focused on the labour market, debating lowering the unemployment threshold from 6.5% to 6%, Fed staff continues to forecast significantly faster growth. Minutes noted that spending was lifting across the economy due to rising wealth levels and lower gasoline prices. Many saw economic growth as ´´meaningful´´ and expected less fiscal drag in 2014.

European shares were mixed on Wednesday but rising confidence that peripheral euro zone economies are starting to recover from the region´s debt crisis underpinned sentiment. Spain´s IBEX rose by 0.7%, while Portugal´s PSI 20 added 1.4% and Greece ATG index lifted by 3.3%. The FTSEurofirst 300 index rose by 0.1% with the UK FTSE lower by 0.5% and the German Dax fell by 0.1%. Mining shares were weaker with BHP Billiton shares down 1% in London trade while Rio Tinto fell by 0.8%.

US share markets declined on Wednesday as investors waited on the Fed minutes. The minutes did not provide any significant shift in market movements. At the close of trade left, the Dow Jones was down by 68 points or 0.4% while the S&P 500 was flat and the Nasdaq rose by 12 points or 0.3%.

US treasury prices fell on Wednesday ahead and following the FOMC minutes (yields higher). US 2 year rose by 2 points to 0.42% while US 10 year yields rose by 4 points to 2.99%.

The US dollar lifted against major currencies on Wednesday as the better-than-expected private sector jobs growth suggested the labour market recovery gained traction. The Euro fell from highs around US$1.3635 to lows near US$1.3550 and was trading around US$1.3575 in afternoon US trade. The Aussie dollar fell from highs near US89.50c to lows near US88.95c, and held near US89.05c in late US trade. And the Japanese yen traded between 105.10 yen per US dollar and JPY104.65 and was trading near 104.80 in afternoon US trade.

World oil prices fell on Wednesday following the EIA oil inventory report. US gasoline stockpiles rose by 6.2 million barrels, while distillate stocks rose by 5.8 million barrels. Brent crude fell by US20c or 0.3% to US$107.23 a barrel while US Nymex crude fell by US$1.34 or 1.4% to US$92.33 a barrel.

Base metal prices were mostly weaker on the London Metal Exchange on Wednesday, with the exception of Tin (up 0.9%). Gold futures fell for a third straight session on Wednesday. The Comex gold price fell by US$4.10 or 0.3% to US$1,225.50 per ounce. The iron ore price fell by US$2.30 to US$131.50 a tonne.

Ahead: In Australia, retail sales and building approvals are released. In the US, no economic data is expected.

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