Australian Stock Market Report – Morning 5-3-13

US MARKET CLOSE MORNING REPORT
(6.10am AEST)

In US economic data, claims for unemployment insurance fell by 18,000 to a five-year low of 324,000. The trade deficit fell from $43.63bn to $38.83bn as a 2.8pct fall in imports outpaced a 0.9pct fall in exports. Productivity grew at a 0.7pct annual pace in the first quarter, short of forecasts for a 1.2pct gain.

The European Central Bank (ECB) has cut its key policy rate for the first time in 10 months, lowering the main rate by a quarter of a percentage point to 0.5 percent. The ECB has indicated that it is prepared to cut rates again to boost growth.

European shares rose on Thursday with investors encouraged by the ECB rate cut. The FTSEurofirst 300 index rose by 0.4pct with the UK FTSE up by 0.2pct while the German Dax lifted by 0.6pct. But mining shares fell in line with metal prices with BHP Billiton down by 0.5pct in London trade while Rio Tinto lost 0.1pct.

US sharemarkets rose on Thursday in response to the ECB rate cut and encouraging economic data. Technology shares out-performed with shares in Facebook up by 5.6pct after a better-than-expected earnings report. The Dow Jones rose by 130pts or 0.9pct with the S&P 500 up by 0.9pct while the Nasdaq lifted by 41.5pts or 1.3pct.

US long-term treasuries rose slightly on Thursday (yields lower) after the ECB cut its key policy rate and indicated it could cut rates again. There was also some caution ahead of US employment data to be released on Friday. US 2yr yields fell by 1pt to 0.20pct while US 10yr yields fell by less than 1pt to 1.629pct.

Major currencies were mixed against the US dollar in European and US trade in response to the ECB rate cut and positive US economic data. The Euro eased from highs near US$1.3210 to around US$1.3035 before ending US trade near US$1.3060. The Aussie dollar broadly held between US102.20c and US102.60c and ended US trade near US102.45c. And the Japanese yen eased from 97.10 yen per US dollar to JPY98.36, before ending US trade at JPY98.00.

World crude oil prices posted solid gains on Thursday. The decision by the ECB to cut rates and its preparedness to cut rates further gave investors encouragement about the outlook for economic growth and therefore oil demand. Brent crude rose by US$2.90 or 2.9pct to US$102.85 and US Nymex crude rose by US$2.96 or 3.3pct to US$93.99 a barrel.

Base metal prices fell up to 1.8pct on the London Metals Exchange on Thursday, the exception being copper, up 0.8pct. But the gold price rose as the ECB rate cut boosted the allure of the yellow metal. The Comex June futures price was up by US$21.40 an ounce or 1.5pct to US$1,467.60 per ounce. The iron ore price fell by US$4.70 from its last trading date on April 30 to US$129.40 a tonne on May 2. The market was closed on May 1.
Ahead: In Australia, the Performance of Services and the Producer Price Indexes reports are due. In the US, the non-farm payrolls (employment) data is due together with the ISM services index.

[Kick off your trading day with our newsletter]