Australian Stock Market Report – Morning 3/20/14

US MORNING REPORT
(7am AEDT)

The US FOMC meeting resulted in the Fed reducing monthly asset purchases from $65 billion to $55 billion. The minutes suggested a shift in forward guidance. The Fed dropped its promise to hold rates steady ´´well past the time´´ the US unemployment rate falls below 6.5% and will look to use a wide range of measures in deciding when to raise rates. The Fed´s assessment of the recent US economic weakness was chalked up to adverse weather conditions. The US Current account deficit narrowed from $96.4 billion to $81.1 billion in the December quarter - a 14-year low.

European shares were mixed on Wednesday with investors avoiding taking significant bets ahead of the US Federal Reserve meeting. UK insurance stocks were hurt by government plans to scrap a requirement that pension savings be used to buy an annuity. Legal & General lost 8.4% while Aviva lost 5.1%. Spain´s IBEX rose 0.4% after the world´s biggest fashion retailer Inditex (up 0.4%) posted strong sales and lifted store openings. The FTSEurofirst 300 index lost 0.1% with the UK FTSE down by 0.5% and the German Dax was higher by 0.4%. Mining shares were weaker in London trade after copper hit an intraday 3½-year low. Shares in BHP Billiton fell by 2.1% and Rio Tinto lost 1.4%. Antofagasta lost 5.3%.

US sharemarkets fell on Wednesday after the release of the Federal Reserve policy statement and comments from Fed Chair Yellen. At the close of trade the Dow Jones index was down by 114 points or 0.7% with the S&P 500 down by 0.6% while the Nasdaq lost 26 points or 0.6%.

US treasury prices fell on Wednesday (yields higher) as traders reacted to the FOMC minutes and accompanying Fed Chair press conference. US 2 year yields rose by 6 points to 0.43% while US 10 year yields rose by 10 points to 2.77%.

The US dollar rallied against major currencies on Wednesday following the FOMC minutes. The Euro fell from US$1.3930 and US$1.3815 and ended US trade around US$1.3830. The Aussie dollar fell from highs near US91.25c to lows near US90.20c and was around US90.30c at the US close. And the Japanese yen weakened from 101.45 yen per US dollar to JPY102.60 and was near JPY102.50 at the US close.

World oil prices were mixed on Wednesday as worries over sanctions affecting Russian oil supplies eased, while US crude oil rose on an inventory drawdown at the benchmark pricing hub. Brent crude fell by US94c or 0.9% to US$105.85 a barrel while US Nymex crude rose by US67c or 0.7% to US$100.37 a barrel.

Base metal prices rose on the London Metal Exchange on Wednesday with Copper (up 1.1%) leading the gains after hitting 3½-year lows intraday. Other metals rose between 0.1%-0.8%. The Comex gold futures price eased by US$17.70 an ounce or 1.3% to US$1,341.30 per ounce. Iron ore was unchanged at US$110.50 a tonne.

Ahead: In Australia detailed employment data and the Reserve Bank Bulletin are released. In the US, existing home sales and leading indicators are released.

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