Australian Stock Market Report – Morning 5/30/14

MORNING REPORT
(6.05am AEST)

In US economic data, March quarter GDP was revised lower from +0.1% to a -1% annual contraction. It was expected to decline by -0.5%. The result was affected by the adverse weather conditions earlier in the year. US pending home sales increased by 0.9% to 97.8 in April, mildly below expectations of 1% increase. Sales are down 9.2% on a year ago. US jobless claims fell by 27,000 to 300,000 last week.

European shares held near six-year highs on Thursday, buoyed by prospects of new economic stimulus when the European Central Bank meets next week. Utility stocks underperformed after broker downgrades. The FTSEurofirst 300 index rose by 0.1%, while the German Dax was flat and the UK FTSE rose by 0.3%. Mining shares were higher in London trade with shares in BHP Billiton up by 1% while Rio Tinto rose 0.3%.

US sharemarkets rallied to fresh record highs on Thursday, as investors shrugged off the weaker March quarter growth figures and bet on more upbeat second quarter results. The ongoing strength in labour market conditions also supported sentiment. Merger and acquisition news buoyed food sector. Hillshire Brands surged 18% after Tyson Foods (up 6%) topped a previous bid from Pilgrim´s pride (down 2%). The Dow Jones lifted by 66 points or 0.4%, with the S&P 500 higher by 0.5%. And the Nasdaq rose by 23 points or 0.5%.

US long-term treasury prices eased on Thursday (yields higher) as traders brushed of the weak March quarter US GDP read with expectations of a solid rebound in the June quarter. US 2 year yields rose by 1 point to 0.38% while US 10 year yields lifted by 1 point to 2.45%.

Major currencies were mixed against the US dollar over European and US sessions. The Euro rose from lows near US$1.3590 to highs near US$1.3620, before ending US trade around US$1.3600. The Aussie dollar rose from lows near US92.75c to highs near US93.10c before finishing US trade around US93.00c. And the Japanese yen traded between 101.75 yen per US dollar and JPY101.45, before ending US trade near its lows at JPY101.75.

World oil prices rose on Thursday after US government data showed a sharp drop in gasoline stockpiles. A strong start to the US summer driving season resulted in gasoline inventories falling by 1.8 million barrels last week and outweighed the smaller-than-expected1.7 million barrel rise in crude stockpiles. Brent crude rose by US27c or 0.2% to US$110.08 a barrel while US Nymex rose by US86c or 0.8% to US$103.58 a barrel.

Base metal prices were mixed on the London Metal Exchange on Thursday. Nickel fell 2.2% while aluminium rose by 0.5%. The Comex gold futures quote fell to fresh 3½-month lows on Thursday, down by US$2.60 an ounce to US$1,257.10 per ounce. Iron ore fell by US$1.10 a tonne or 1.1% on Thursday to US$95.70 a tonne.

Ahead: In Australia, private sector credit. In the US no economic data is released.

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