Australian Stock Market Report – Morning 2/6/14

MORNING REPORT
(8am US REPORT AEDT)

In US economic news, the ISM non-manufacturing index rose by 1 point to 54.0 in January, slightly ahead of expectations. The employment sub-index lifted to 56.4 - a new high since November 2010, and suggested healthy jobs growth in the services sector.

Atlanta Fed President Lockhart (non-voter) said that he expects tapering to continue to continue at the current pace with asset purchases wound down by the end of 2014. Expects jobless rate to fall to 6.5% in the near term, and it was unlikely Fed funds rate will rise before 2015. Inflation is expected to remain well anchored although likely to rise toward 2% by year end.

European shares inched higher on Wednesday, but concerns about emerging market currencies kept investors on edge. Pharmaceutical giant GlaxoSmithKline rose by 1.6% after lifting earnings forecasts and raising the dividend following better productivity in its drug labs. The FTSEurofirst 300 index rose by 0.1% with the UK FTSE rose by 0.1% and the German Dax was lower by 0.1%. Mining shares were mixed in London trade with BHP Billiton shares down by 0.4% while Rio Tinto rose by 1%.

US sharemarkets were mildly weaker on Wednesday as investors waited on the payrolls data on Friday night. The S&P 500 hit the lowest level since mid-October before bouncing. At the close of trade, the US Dow Jones was down by 5 points with the S&P 500 down by 0.2% while the Nasdaq fell by 20pts or 0.5%.

US long-term treasury prices fell on Wednesday (yields higher) as traders bet that Friday´s payrolls data will come in relatively strong following the strong ADP private sector employment read. US 2 year yields fell by 1 point to 0.32% while US 10 year yields rose by 3 points to 2.67%.

Major currencies rose against the greenback in European and US trade on Wednesday. The Euro rose from early lows near US$1.3495 to highs around US$1.3555, and held near US$1.3535 in afternoon US trade. The Aussie dollar rose from lows near US88.80c to highs near US89.35c, and was near US89.15c in afternoon US trade. And the Japanese yen weakened from 100.85 yen per US dollar to JPY101.55 and was trading near JPY101.30 in afternoon US trade.

World oil prices rose on Wednesday as continued cold weather in the US north-east boosted demand for energy products. Also supporting prices was data from the US Energy Information Administration showed that distillate stocks fell by more than double expectations in the latest week. Brent crude rose by US19c or 0.2% to US$106.20 a barrel while US Nymex crude rose by US19c or 0.2% to US$97.38 a barrel.

Base metal prices were mostly higher on the London Metal Exchange on Tuesday with aluminium (up 0.8%) leading the gains. Nickel lost 0.6%. The gold price traded lifted on Wednesday with the Comex gold futures rising by US$5.70 or 0.5% to US$1,256.90 per ounce. The iron ore price was unchanged at US$122.60 a tonne.

Ahead: In Australia, retail sales and trade data are released. In the US, trade data is issued.

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