Australian Stock Market Report – Morning 5/21/14

MORNING REPORT
(6.05am AEST)

US Philadelphia Federal Reserve President Plosser spoke on Tuesday, commenting that the $2.5 trillion in reserves accumulated by banks could be the trigger for more rapid inflation if banks start lending money quickly in an improving economy. Plosser said it was the ´´natural tendency´´ for central banks to wait too long to raise rates. He believes there was increasing evidence that rates should be lifted from the current zero levels ´´if not now, then relatively soon´´, particularly in light of strong employment and wage growth.

European shares eased further on Tuesday. Telco Vodafone (down 5.5%) was the biggest drag on the market after writing down the value of some of its European assets to the tune of £6.6 billion due to fierce competition and regulatory changes. held back by Vodafone. Credit Suisse lifted by 1% after agreeing to pay a $2.5 billion fine to US authorities for helping Americans evade taxes. The FTSEurofirst 300 index fell by 0.1% while the German Dax lost 0.2%, and the UK FTSE fell by 0.6%. Mining shares were lower with shares in BHP Billiton down by 1.3% while Rio Tinto fell by 0.7%.

US sharemarkets fell on Tuesday with weakness in retail shares dragging the market lower. TJX Cos, owner of cut-price chain stores TJ Maxx and Marshalls, fell 7% after reporting lower than expected quarterly revenue. Caterpillar shares dropped 2.8%, after reporting activity down 13% in the three months to April. The Dow Jones index fell by 138 points or 0.8% with the S&P 500 off by 0.7% while the Nasdaq lost 29 points or 0.7%.

US treasury prices rose on Tuesday (yields lower) as traders waited on key events, including the ECB policy decision next month and upcoming Ukraine elections. US 2 year yields fell by 2 points to 0.34% while US 10 year yields were down by 4 points to 2.51%.

Major currencies were mostly weaker against the US dollar on Monday over the European and US sessions. The Euro fell from highs near US$1.3710 to lows near US$1.3680, before ending US trade around US$1.3700. The Aussie dollar fell from highs near US92.90c to lows near US92.40c before finishing US trade around US92.50c. And the Japanese yen held between 101.50 yen per US dollar and JPY101.20, before ending US trade near JPY101.30.

World oil prices were mixed on Tuesday. Brent crude prices lifted supported by on-going supply disruptions in Libya, while expectations of a lift in US crude stockpiles kept a lid on Nymex prices .Brent crude rose by US33 or 0.3% to US$109.70 a barrel while US Nymex fell by US17c or 0.2% to US$102.44 a barrel.

Base metal prices were weaker on the London Metal Exchange on Tuesday. Tin was the worst performer down 1.7%, while other metals fell between 0.2%-1.2%. The Comex gold futures quote rose by just US80c an ounce on Tuesday to US$1,294.60 per ounce. Iron ore fell by US$1 a tonne on Tuesday to US$97.50 a tonne.

Ahead: In Australia consumer sentiment and wage price data for the March quarter are released. In the US, the FOMC minutes are released.

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