Australian Stock Market Report – Morning 2/7/14

US MID SESSION MORNING REPORT
(7am AEDT)

In US economic news, the trade deficit widened by 12% to $38.7 billion in December. The deterioration was driven by a 1.8% drop in exports - the biggest decline in over a year. Imports lifted by 0.3%. Jobless claims fell by 20,000 to 331,000 last week. US productivity rose at a 3.2% pace in the December quarter after an even brisker 3.6% pace in the September quarter.

European shares rallied on Thursday in healthy volumes. Strong earnings supported sentiment. Alcatel-Lucent surged by 9.2% after the Telco equipment manufacturer posted strong margins and operating profit. Stocks briefly pared gains after the European Central Bank left interest rates unchanged and at the press conference ECB President revealed no further easing measures. The Bank of England also kept policy settings on hold. The FTSEurofirst 300 index rose by 1.4% with the UK FTSE up by 1.6% and the German Dax was higher by 1.5%. Mining shares were higher in London trade with BHP Billiton shares up by 1.3% while Rio Tinto rose by 2%.

US sharemarkets rose on Thursday after the better-than-expected jobless claims figures boosted investor sentiment ahead of Friday´s payrolls data. Walt Disney shares climbed 5.4% and was the biggest gainer on the Dow and S&P 500 after reporting a strong December quarter profit. With an hour of trade left, the US Dow Jones was up by 170 points or 1.1% with the S&P 500 up by 1.2% while the Nasdaq rose by 46pts or 1.1%.

US long-term treasury prices fell on Thursday (yields higher) as investors positioned themselves ahead of Friday´s payrolls data. US 2 year yields were flat at 0.33% while US 10 year yields rose by 3 points to 2.70%.

Major currencies rose against the greenback in European and US trade on Thursday. The Euro rose from early lows near US$1.3495 to highs around US$1.3615, and held near US$1.3590 in afternoon US trade. The Aussie dollar rose from lows near US89.40c to highs near US89.75c, and was near US89.65c in afternoon US trade. And the Japanese yen weakened from 101.25 yen per US dollar to JPY102.10 and was trading near JPY102.05 in afternoon US trade.

World oil prices rose on Thursday supported by the better economic data and strength in share markets. Brent crude rose by US46c or 0.9% to US$107.21 a barrel while US Nymex crude rose by US46c or 0.5% to US$97.84 a barrel.

Base metal prices were higher on the London Metal Exchange on Wednesday with zinc (up 2.1%) leading the gains. Other metals lifted between 0.2-1.7%. The gold price rose modestly on Thursday with the Comex gold futures rising by US30c to US$1,257.20 per ounce. The iron ore price fell by $1.40 to US$121.00 a tonne.

Ahead: In Australia, the RBA issues the Statement on Monetary Policy. In the US, non-farm payroll are released.

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