Australian Stock Market Report – Morning 3/6/14

US MORNING REPORT
(8am AEDT)

In US economic data, the ISM services gauge eased from 54.0 to 51.6 in February, short of forecasts centred around 53.5. But the rival Markit services index rose from 52.7 to 53.3. The ADP employment index showed that there were 139,000 private sector jobs created in February, short of forecasts for a gain of 160,000. And the Federal Reserve Beige Book notes that economic activity declined in two of 12 regions, largely due to harsh winter weather.

Chinese authorities have reportedly committed to an economic growth target of 7.5% in 2014. The aim is to keep inflation to 3.5% and create 10 million urban jobs this year.

European shares eased on Wednesday with the FTSEurofirst 300 index down by 0.1%. But while the UK FTSE lost 0.7% and the German Dax fell by 0,5%, the Italian sharemarket rose 1.4% and the Spanish bourse lifted 0.9%. Mining shares fell in London trade with shares in BHP Billiton down by 2.3% while Rio Tinto lost 3.3%.

US sharemarkets steadied on Wednesday after the big gains recorded the previous day. Economic data was softer-than-expected while investors looked ahead to the employment report on Friday. At the close of trade, the US Dow Jones was down by 35 points or 0.2% with the S&P 500 down by less than 1 point while the Nasdaq lifted by 6 points or 0.1%.

US treasury prices rose slightly on Wednesday (yields lower) as investors adjusted asset positions ahead of Friday´s employment report. The softer batch of economic data on Wednesday provided supported for government bonds. US 2 year yields fell by 2 points to 0.333% while US 10 year yields eased 1 point to 2.69%.

Major currencies were again mixed against the greenback over the European and US sessions. The Euro held between US$1.3705 and US$1.3745 and was around US$1.3730 in afternoon US trade. The Aussie dollar rose from near US89.50c to highs near US89.90c and was trading near US89.85c in afternoon US trade. And the Japanese yen weakened from near 102.11 yen per US dollar to JPY102.53 and was trading near JPY102.33 in afternoon US trade.

World oil prices fell on Wednesday. Investors took the view that diplomatic efforts would succeed in defusing the crisis in the Ukraine. And data showed a rise in US distillate stocks (includes heating oil) in the latest week. Brent crude fell by US$1.54 or 1.4% to US$107.76 a barrel while US Nymex crude fell by US$1.88 or 1.8% to US$101.45 a barrel.

Base metal prices were generally lower up to 0.9% on the London Metal Exchange on Wednesday but nickel rose 0.8% and aluminium rose 0.4%. The gold price lifted modestly as investors monitored diplomatic efforts in the Ukraine crisis. The Comex gold futures price rose by US$2.70 an ounce or 0.2% to US$1,340.30 per ounce. Iron ore fell by US10c on Wednesday to US$116.70 a tonne.

Ahead: In Australia, retail sales and international trade data are released. In the US, weekly jobless claims data is released. The European Central Bank meets to decide interest rates.

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