Australian Stock Market Report – Morning 3/6/2013

US MORNING REPORT

(8am AEDT)

The US ISM services index rose from 55.2 to 56.0 in February, the highest level in a year and above forecasts centred on result near 55.0. The exports sub-component of the index hit the highest level in almost six years. The Redbook chain store sales index was up 2.2pct in the latest week on a year ago.

European shares posted solid gains on Tuesday. Mining stocks led the way, rebounding after the previous day´s sell-off. Shares in Rio Tinto were up by 3.7pct in London trade while shares in BHP Billiton rose by 3.5pct. The benchmark FTSEurofirst 300 index rose by 1.8pct to 4-1/2 year highs while the UK FTSE index lifted by 1.4pct to 5-year highs and the German Dax gained 2.3pct.

The US Dow Jones share index powered to record highs on Tuesday on growing optimism about the US economy. A gauge of the services index lifted above forecasts in February. New economic forecasts by Chinese officials also boosted optimism about the outlook for that economy. And grain-handling firms ConAgra, Cargill and CHS said that they plan to merge their North American milling businesses into a company called Ardent Mills. At the close of trade, the Dow Jones was up by 126pts or 0.9pct after being up 158pts at one stage. The S&P 500 index rose by 1.0pct and the Nasdaq gained 42pts or 1.3pct.

US long-term treasuries fell again on Tuesday (yields higher) as investors shunned safe-haven assets like government bonds in favour of equities and commodities. US 2yr yields were steady near 0.24pct while US 10yr yields rose by 2pts to 1.896pct.

Major currencies were mixed against the US dollar in European and US trade on Tuesday. The Euro drifted between US$1.3010 and US$1.3075 and was near US$1.3040 at the US close. The Aussie dollar drifted higher from US102.10c to US102.60c and was around the highs at the end of the US session. And the Japanese yen eased from 92.93 yen per US dollar to JPY93.51, and was trading near JPY93.27 at the close of US trade.

World crude oil prices rose in line with other commodities and equities markets in so-called ´´risk on´´ trades. A key gauge of the US services sector hit 12-month highs on Tuesday with the export component near 6-year highs. Brent crude rose by US$1.52 to US$111.61 and the US Nymex crude price lifted by US70c to US$90.82 a barrel.

Base metal prices rose up to 1.4pct on the London Metals Exchange on Tuesday. The gold price rose modestly with the Comex April gold futures price up by US$2.50 an ounce or 0.2pct to US$1,574.90 per ounce. But the iron ore price fell by US$3.60 to US$145.20 a tonne.

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