Australian Stock Market Report – Morning 5/22/14

MORNING REPORT
(6.05am AEST)

US FOMC minutes saw Fed members having a generally cautious outlook. The minutes made it clear that a number of members believe the unemployment rate alone does not fully capture the amount of slack in the labour market, while also claiming it was too early to confirm that the economy is moving to sustained above-trend growth.

European shares lifted on Wednesday, with German utilities rising on the back of broker upgrades. Danish shipping and oil group A.P. Moller-Maersk (a bellwether for global trade) lifted 3.9% after beating profit forecasts and raising full year outlook. The FTSEurofirst 300 index rose by 0.6% while the German Dax gained 0.6%, and the UK FTSE rose by 0.3%. Mining shares were mixed with shares in BHP Billiton flat while Rio Tinto fell by 0.4%.

US sharemarkets rose on Wednesday after the FOMC minutes confirmed no rate hikes would come anytime soon. Retail stocks were once again in the spotlight. Tiffany & Co jumped 8% and was the best performer on the S&P 500 after raising full-year profit forecasts. The S&P retail sector was up 1.2%. The utility sector was the only sector that was mildly weaker. The Dow Jones index rose by 159 points or 1% with the S&P 500 up by 0.8% while the Nasdaq rose 35 points or 0.9%.

US long-term treasury prices fell on Wednesday (yields higher) as traders digest the FOMC minutes. US 2 year yields were flat at 0.34% while US 10 year yields were up by 2 points to 2.54%.

Major currencies were mixed against the US dollar on Monday over the European and US sessions. The Euro fell from highs near US$1.3725 to lows near US$1.3640, before ending US trade around US$1.3685. The Aussie dollar lifted from lows near US92.10c to highs near US92.50c, ending US trade near its highs. And the Japanese yen held between 100.85 yen per US dollar and JPY101.45, before ending US trade near JPY101.35.

World oil prices were higher on Wednesday following a large drawdown in crude stockpiles. US oil inventories fell by 7.2 million barrels last week against analyst expectations of a 750,000 barrel lift. Brent crude rose by US67c or 0.6% to US$110.37 a barrel while US Nymex rose by US$1.63 or 1.6% to US$104.07 a barrel.

Base metal prices were weaker on the London Metal Exchange on Wednesday. Nickel was the worst performer down 1.8%, while other metals fell between 0.1%-0.7%. The Comex gold futures quote fell US$6.50 an ounce on Wednesday to US$1,288.10 per ounce. Iron ore rose by US$1 a tonne on Tuesday to US$98.50 a tonne.

Ahead: In Australia no economic data is released. In the US, the leading indicators index, existing home sales are released. Flash manufacturing gauges are released across the globe including China.

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