Australian Stock Market Report – Morning 4/1/14

US MORNING REPORT
(7.00am AEDT)

In US economic data, the Chicago Purchasing Management Index fell from 59.8 to 55.9 in March - a seven month low. Federal Reserve Chair Yellen gave a speech on Monday strongly defending the Fed´s policy of low interest rates and bond-buying. Yellen said the ´´extraordinary´´ commitment to stimulus will be needed for some time, saying there is ´´considerable´´ slack in the economy and labour market. Yellen suggested that the ´´view is widely shared by my fellow policy-makers at the Fed´´.

European shares were mixed on Monday as speculation of fresh stimulus measures from the ECB supported initial sentiment. Italian mid-tier banks were among the top gainers on signs of a boost in capital and increased foreign investment. However end of quarter rebalancing triggered a minor sell-off in late trade. The FTSEurofirst 300 index rose by 0.1% with the UK FTSE down 0.3%, while the German Dax lost 0.3%. Mining shares were mixed in London trade with shares in BHP Billiton down by 0.4% while Rio Tinto rose by 1.8% higher.

US sharemarkets rose on Monday after Fed Chair Yellen calmed concerns about an earlier than anticipated rate hike. Cyclical stocks linked to growth led the gains. The Nasdaq Biotech index jumped 3%. The Dow Jones index closed higher by 134 points or 0.8% with the S&P 500 up by 0.8% while the Nasdaq rose by 43 points or 1%. Over the quarter the Dow Jones rose by 0.7%, with the S&P 500 up 1.3% while the Nasdaq rose 0.5%.

US treasury prices were mixed on Monday as Yellen´s dovish comments were offset against expectations of a better-than-expected employment report on Friday. US 2 year yields fell 3pts to 0.43% while US 10 year yields were flat at 2.73%.

Major currencies rallied against the greenback over the European and US sessions on Monday. The Euro rose from lows near US$1.3735 to US$1.3805 and ended US trade around US$1.3775. The Aussie dollar rose from lows near US92.20c to highs near US92.75c and was around US92.70c at the US close. And the Japanese yen eased from near 102.80 yen per US dollar to JPY103.40 and was near JPY103.20 at the US close.

World oil prices eased on Monday in a volatile session. News that Russia was withdrawing some troops on the Ukrainian border pressured the oil price. Brent crude fell by US29c or 0.3% to US$107.78 a barrel while US Nymex crude fell by US9c or 0.1% to US$101.58 a barrel. Over the quarter Nymex rose by 3.2%.

Base metal prices were mixed on the London Metal Exchange on Monday with copper (down 0.5%) leading the declines. Nickel managed to gain 1.2%. The gold price fell on Monday with the Comex futures quote down by US$10 an ounce to US$1,283.80 per ounce. Over the quarter gold rose by 6.8%. Iron ore rose by $4.50 to US$116.80 a tonne on Monday but was down 13% over the quarter.

Ahead: In Australia the PMI and the RP Data-Rismark house price index are released. The Reserve Bank meets to decide on interest rates. In the US, the ISM manufacturing index and construction spending figures are released.

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