Australian Stock Market Report – Morning 2/12/14

US MORNING REPORT
(8am AEDT)

In testimony to the US House of Representatives, US Federal Reserve chair, Janet Yellen, said that she strongly supports the current policy strategy and expects a ´´great deal of continuity´´. Yellen also noted that recovery in the labour market is far from complete.

Republican leaders in the US House of Representatives agreed on Tuesday to pass legislation raising Washington´s borrowing authority without conditions.

European shares rose on Tuesday with investors encouraged by comments from the new head of the US Federal Reserve, Janet Yellen, who pledged continuity in the central bank strategy. The FTSEurofirst 300 index rose by 1.3% with the UK FTSE up by 1.2% while the German Dax gained 2.0%. Mining shares were also stronger in London trade with BHP Billiton shares up by 1.9% while Rio Tinto gained 2.3%.

US sharemarkets posted solid gains on Tuesday with investors comforted by testimony from the new Federal Reserve chief as well as the agreement to lift the debt ceiling. At the close of trade, the US Dow Jones was up 193 points or 1.2% after being up 225pts at one stage. The S&P 500 was up 1.1% while the Nasdaq gained 43 points or 1.0%.

US long-term treasury prices fell on Tuesday (yields higher) as investors shifted affections from bonds to equities, encouraged by the testimony from the Federal Reserve chief. US 2 year yields rose by 2 points to 0.335% while US 10 year yields rose by 4 points to 2.72%.

Major currencies were mixed against the greenback over the European and US sessions as traders dissected testimony from the new Fed chief. The Euro held between US$1.3630 and US$1.3680, and was near US$1.3640 in afternoon US trade. The Aussie dollar rose from lows near US89.90c to highs near US90.45c, and was near US90.40c in afternoon US trade. And the Japanese yen eased from its strongest levels near 102.15 yen per US dollar to JPY102.69 and was trading near JPY102.60 in afternoon US trade.

World oil prices were mixed on Tuesday. Harsh winter weather was forecast to hit the US east coast, boosting heating oil demand. But gains in oil prices were limited by expectations of further improvement in Libyan oil exports. Brent crude rose by US5c to US$108.68 a barrel while US Nymex crude fell by US12c or 0.1% to US$99.94 a barrel.

Base metal prices were mixed on the London Metal Exchange on Tuesday with gains and declines not exceeding 0.5%. The gold price rose for a fifth straight session on Tuesday with the Comex gold futures up by US$15.10 or 1.2% to US$1,289.80 per ounce. The iron ore price fell by 80c on Tuesday to US$120.00 a tonne.

Ahead: In Australia monthly consumer sentiment data is issued. Commonwealth Bank is amongst those to report half-year earnings. In the US, weekly mortgage data and monthly Federal Budget figures are issued.

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