Australian Stock Market Report – Morning 5/15/2012

MORNING REPORT
(7am AEST)

Euro-zone industrial production fell by 0.3pct in March, taking the annual contraction to -2.2pct - the lowest annual pace since 2009. Performance across the four major Eurozone countries was again vastly divergent. Industrial production over the year to March stood at: Germany (+1.4pct), France (-1.2pct), Italy(-5.8pct) and Spain (-7.5pct).

European shares fell sharply on Monday closing at a 4-month low. The sell-off was broad-based as the political deadlock in Greece raised the prospect of an exit from the euro zone. The STOXX 600 Banking index fell 2.8pct. Concerns over China´s slowdown also hurt mining stocks. The benchmark FTSEurofirst 300 index fell 1.8pct with the German Dax down 1.9pct while the UK FTSE lost 2pct.

US sharemarkets fell on Monday as investors waited on a result to the political crisis in Greece. JP Morgan Chase lost 1.8pct following on from the 9pct loss on Friday after it announced the exit of its investment chief and suggested trading losses could exceed $3 billion. The Dow Jones fell by 125pts or 1pct and the S&P 500 also fell by 1.1pct while the Nasdaq lost 31pts or 1.1pct.

US long-dated treasuries rose (yields lower) on Monday. Speculation that Greece may exit the Euro Zone prompted investors to switch out of riskier asset classes like equities and into safe-haven US government bonds. US 2yr yields rose 1pt to 0.27pct and US 10yr yields eased 7pts to 1.78pct.

European and commodity currencies fell against the greenback in overnight trade. The Euro fell from highs near US$1.2895 to lows around US$1.2825 and ended US trade near US$1.2830. The Aussie dollar fell from highs of US100.15c to US99.55c and ended US trade near US99.65c. And the Japanese yen held between 80.15 yen per US dollar to JPY79.65 and was near JPY79.85 at the close of US trade.

Benchmark crude oil prices fell on Monday, as the array of negative news compounded the downside risks to global growth. Further weighing on prices was comments from Saudi Arabia´s oil Minister Ali al-Naimi. Saudi Arabia believes a Brent Crude price of around US$100 a barrel would be ideal and are working towards getting prices lower as inventory builds. US Nymex crude fell by US$1.35 to US$94.78 a barrel and London Brent crude fell by US69c to US$111.57 a barrel.

Base metal prices were weaker on the London Metals Exchange on Monday. Copper led the declines, falling by 2.5pct to a 4-month low. Concerns about the slowdown in China and Europe were the main driver. And the gold price fell on Monday in line with other commodities. The June Comex gold futures price closed down US$23 or 1.5pct to US$1,561.00 an ounce - a 4-month low.

Ahead: In Australia Reserve Bank Board Minutes and Motor vehicle sales are released. In the US, the Empire manufacturing survey, retail sales, business inventories and the NAHB Housing market index are all scheduled for released.

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