Australian Stock Market Report – Morning 2/20/14

US MORNING REPORT
(8am AEDT)

In US economic data, producer prices rose by 0.2% in January to be up 1.2% over the year. Analysts had expected prices to rise by 0.1%. US housing starts fell by 16% to an 880k annualised rate - significantly weaker than the 950k consensus, though the volatility was accounted for by the bad weather. Building permits also dropped by 5.4% to 937k.

The FOMC minutes showed several participants wanted a ´´clear presumption´´ in favour of $10 billion cuts to bond buying at each policy meeting unless the economy surprised. The Fed continued to maintain its pledge to keep interest rates low for some time to come.

European shares were mixed on Wednesday, paring most of the losses in late trade. European grocer WM Morrison lifted by 4.9% after Reuters reported that bankers were working on a £5 billion debt financing deal to back the sale to a private-equity fund. Better profit results supported markets. Shares in the world´s fourth largest brewer Carlsberg surged by 7.1% after it reported better than expected earnings and raised its dividend. The FTSEurofirst 300 index rose by 0.1% while the UK FTSE and German Dax were both flat. Mining shares were stronger in London trade with BHP Billiton shares up by 0.8% while Rio Tinto gained 1.6%.

US sharemarkets were weaker on Wednesday as investors dissected the weaker economic data and the FOMC minutes. At the close of trade, the US Dow Jones was down by 90 points or 0.6% and the S&P 500 was down by 0.7% while the Nasdaq lost 35 points or 0.8%.

US long-term treasury prices fell on Wednesday (yields higher) following the FOMC minutes. US 2 year yields rose by 1point to 0.32% while US 10 year yields rose by 2 points to 2.73%.

Major currencies fell against the greenback after the release of the FOMC minutes. The Euro fell from highs near US$1.3770 to US$1.3725 and was near US$1.3735 in afternoon US trade. The Aussie dollar fell from highs near US90.45c to lows near US89.90c and was holding around US89.95c in afternoon US trade. And the Japanese yen eased from 101.85 yen per US dollar to JPY102.45 and was trading near JPY102.25 in afternoon US trade.

US oil prices hit 4-month highs on Wednesday as harsh winter weather on the US east coast boosted heating oil demand. Traders also weighed concerns that of political tension in Africa and Venezuela. Brent crude rose by US5c to US$110.51 a barrel while US Nymex crude rose by US88c or 0.9% to US$103.31 a barrel.

Base metal prices were mixed on the London Metal Exchange on Wednesday with nickel (+0.4%) the best performer while zinc lost 0.6%. The gold price fell on Wednesday with the Comex gold futures down by US$4 or 0.3% to US$1,320.40 per ounce. The iron ore price fell by US50c to US$123.90 a tonne.

Ahead: In Australia the AWOTE figures are released. In the US, CPI data is released. Flash PMI´s are released across the globe.

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