Australian Stock Market Report – Morning 3/5/2013

US MORNING REPORT

(8am AEDT)

China´s Shanghai Composite share index slumped by 3.7pct on Monday in response to Friday´s decision by state authorities to tighten restrictions on housing finance. China´s CSI300 index lost 4.6pct, the biggest drop since November 2010. Hong Kong´s Hang Seng index fell by 1.5pct.

The New York ISM index rose from 568.3 to 572.7 in February.

European shares were mixed again on Monday. Mining stocks fell in response to measures to tighten the Chinese property market with shares in Rio Tinto down by 3.7pct in London trade while shares in BHP Billiton fell by 2.1pct. But defensive areas like food, healthcare and household goods were supported. The benchmark FTSEurofirst 300 index was flat while the UK FTSE index fell by 0.5pct and the German Dax lost 0.2pct.

US sharemarkets fell at the open of trade after weak performances in Asian and European sharemarkets. Investors also weighed the impact of US spending cuts totalling US$85 billion. But markets stabilised as investors embraced bargain stocks. After being down 69 points at one stage, the Dow Jones finished higher by 38pts or 0.3pct. The S&P 500 index rose by 0.5pct and the Nasdaq lifted by 12pts or 0.4pct.

US long-term treasuries fell on Monday (yields higher) as profit-taking outweighed worries about the health of the Chinese property market and spending cuts in the US. US 2yr yields fell by 1pt to 0.238pct while US 10yr yields rose by 3pts to 1.875pct.

The Euro and Japanese yen drifted against the US dollar in European and US trade on Monday but the Aussie dollar recovered from losses made in Asia. The Euro drifted between US$1.2980 to US$1.3025 and was near US$1.3020 at the end of US trade. The Aussie dollar lifted from 7-month lows near US101.15c to US101.95c and was around the highs at the US close. And the Japanese yen strengthened from 93.67 yen per US dollar to JPY93.17, and was trading near JPY93.42 at the end of the US session.

World crude oil prices fell again on Monday. US spending cuts, worries about the health of the UK economy, political uncertainty in Italy and measures to tighten the Chinese property market all raised fears about global economic growth and oil demand. Brent crude fell by US31c to US$110.09 and the US Nymex crude price eased by US56c to US$90.12 a barrel.

Base metal prices were mixed on the London Metals Exchange on Monday. Tin rose 0.9pct and copper rose 0.3pct but other metals fell up to 1.4pct (lead). The gold price was little changed with the Comex April gold futures price up by US10c an ounce to US$1,572.40 per ounce. The iron ore price fell by US$1.80 to US$148.80 a tonne.

Ahead: In Australia, the Reserve Bank Board meets and data on retail trade and government finance are released with the balance of payments and Performance of Services index. In the US, the ISM services index is released. In China the National People´s Congress meets.

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