Australian Stock Market Report – Morning 5/1/14

MORNING REPORT
(6.00am AEST)

In US economic data, the economy grew at a 0.1% annual pace in the year to March, short of forecasts for a gain of 1.2%. The ADP survey showed that 220,000 private sector jobs were created in April, above forecasts for a gain of 210,000. Employment costs rose by 0.3% in the March quarter, below forecasts for a gain of 0.5%.

The US Federal Reserve will trim its monthly bond purchases from US$55 billion to US$45 billion as expected. The Fed noted that ´´household spending appears to be rising more quickly´´ but it added that business investment ´´edged down.´´

European shares were generally modestly higher on Wednesday as investors dissected merger and acquisition news and data showing weak first quarter growth in the US. The FTSEurofirst 300 index was largely flat but both the German Dax and the UK FTSE rose by 0.2%. And mining shares also edged higher in London trade with shares in BHP Billiton up by less than 0.1% while shares in Rio Tinto lifted by 0.1%.

US sharemarkets rose on Wednesday with the Dow Jones index closing at a record high. Investors were encouraged that there were no surprises from the Federal Reserve and that commentary was largely upbeat. The Dow Jones index hit an intra-day record high before closing up by 45 points or 0.3% to a closing record high of 16,580.84 points. The S&P 500 was up by 0.3% and the Nasdaq lifted by 11 points or 0.3%.

US long-term treasury prices rose on Wednesday (yields lower) after data showed the US economy only inching ahead in the March quarter. US 2 year yields fell by 4 points to 0.414% while US 10 year yields fell by 5 points to 2.65%.

Major currencies were generally firmer against the US dollar on Wednesday in response to weak US economic growth data. The Euro rose from lows near US$1.3785 to highs near US$1.3885, before ending US trade around US$1.3870. The Aussie dollar held between US92.50c and US93.00c before finishing US trade around US92.85c. And the Japanese yen lifted from 102.60 yen per US dollar to JPY102.04 before ending US trade near JPY102.21.

World oil prices fell on Wednesday after data showed that US crude oil inventories hit record highs last week. Brent crude fell by US91c or 0.8% to US$108.07 a barrel while US Nymex fell by US$1,54 or 1.5% to US$99.74 a barrel.

Base metal prices fell by up to 1.1% on the London Metal Exchange on Wednesday with tin and copper falling the most. Nickel bucked the trend, lifting by 0.1%. The Comex gold futures quote fell by just US40c an ounce to US$1,295.90 per ounce. But after the Fed decision spot gold fell another US$5.50 an ounce. Iron ore fell by US$2.90 a tonne or 2.8% to US$105.40 a tonne.

Ahead: In Australia the RP Data/Rismark home price index is released together with the Performance of Manufacturing index. ANZ - In the US, the ISM manufacturing report is released with figures showing weekly claims for unemployment insurance.

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