Australian Stock Market Report – Morning 2/5/14

MORNING REPORT
(8am US REPORT AEDT)

In US economic news, factory orders fell by 1.5% in December after rising by 1.5% November. The weakness was largely driven by a 9.7% decline in new orders for transportation. In fact factory orders excluding transportation lifted by 0.2%.

Chicago Fed President Evans (non-voter) said that he expects much better momentum for the US economy over 2014, as economic headwinds fade. Evan´s expects inflation to remain low and unemployment high, leading to rates staying near zero ´´well into 2015´´.

European shares eased marginally on Tuesday, pegged back by disappointing earnings results. Chip designer ARM fell 5.9% after royalty revenue came in below forecasts. Banks were well supported after UBS (up 5.4%) announced a higher-than-expected profit and dividend. The STOXX 600 Banking index rose by 2.1%. The FTSEurofirst 300 index fell by 0.2% with the UK FTSE down by 0.3% and the German Dax lower by 0.6%. Mining shares were mixed in London trade with BHP Billiton shares down by 0.5% while Rio Tinto rose by 0.7%.

US sharemarkets rose on Tuesday as bargain hunters stepped in following the prior session´s selloff. Consumer and financial stocks led the gains. At the close of trade left, the US Dow Jones was up by 72 points or 0.5% with the S&P 500 higher by 0.8% while the Nasdaq rose by 35pts or 0.9%.

US long-term treasury prices fell from three-month highs on Tuesday (yields higher) as stocks recovered and investors reduced demand for ´´safe haven´´ government bonds. US 2 year yields rose by 1 point to 0.31% while US 10 year yields rose by 4 points to 2.62%.

Major currencies rose against the greenback in European and US trade on Tuesday. The Euro hit early highs near US$1.3535 before easing to US$1.3495, and lifting to US$1.3510 in afternoon US trade. The Aussie dollar rose from lows near US87.30c to highs near US89.35c, and was near US89.35c in afternoon US trade. And the Japanese yen weakened from 100.80 yen per US dollar to JPY101.65 and was trading near JPY101.60 in afternoon US trade.

World oil prices were mixed on Tuesday as expectations of a drawdown in oil inventories was offset by slower growth concerns in China and the US. Brent crude fell by US36c or 0.3% to US$106.04 a barrel while US Nymex crude fell by US$1.06 or 1.1% to US$96.43 a barrel.

Base metal prices were mostly higher on the London tal Exchange on Tuesday with aluminium (up 0.7%) leading the gains. Nickel lost 0.2%. The gold price traded within a tight range on Tuesday with the Comex gold futures closing down by US$8.70 or 0.7% to US$1,251.20 per ounce. The iron ore price was unchanged at US$122.60 a tonne.

Ahead: In Australia, new car sales data is released. In the US, the ISM non-manufacturing survey is issued.

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