Australian Stock Market Report – Morning 5/8/14

MORNING REPORT
(6.05am AEST)

In US economic data, consumer credit rose by $17.5 billion in March to $3.14 trillion - this was the largest increase since February 2013. Revolving credit -which measures credit card usage - rebounded by $1.1 billion in March.

In testimony to the congress, Federal Reserve Chair Janet Yellen repeated her stance that the economy was still in need of lots of support given the ´´considerable slack´´ in the labour market. Yellen took a different path than in previous commentary outlining the risks facing the economic recovery. She mentioned geopolitical tensions as a ´´prominent risk´´ and concerns that ´´the recent flattening in housing activity could prove more protracted than currently expected´´

European shares were mixed on Wednesday as positive earnings results was offset by scepticism over Fiat Chrysler´s new business plan. Investors were unconvinced by its plan to boost sales by 60% by 2018, with the stock tumbling by almost 12% and being the biggest drag on the FTSEurofirst300. France´s third largest bank Credit Agricole rose 6.8% after reporting a 30% rise in net income in its first quarter result. The FTSEurofirst 300 index edged higher, up by 0.1%. The German Dax lifted by 0.6% and the UK FTSE fell by just 2pts. And mining shares rose in London trade with shares in BHP Billiton up 0.3% and Rio Tinto up by 1%.

US sharemarkets were mostly higher on Wednesday as the Federal Reserve signalled it will continue to support the economy. But the Nasdaq fell for a second straight day weighed down by technology stocks. The Dow Jones rose by 118 points or 0.7% with the S&P 500 up by 0.6% and the Nasdaq lost 13 points or 0.3%.

US short-term treasury prices rose on Wednesday (yields lower) following Fed Chair Yellen's dovish comments. US 2 year yields fell by 3pts to 0.40% while US 10 year yields were flat at 2.59%.

Major currencies were generally weaker against the US dollar on Wednesday despite Yellen´s comments. The Euro fell from highs near US$1.3935 to lows near US$1.3910, ending US trade around its lows. The Aussie dollar fell from around US93.50c to near US93.20c before finishing US trade around US93.30c. And the Japanese yen eased from 101.40 yen per US dollar to almost JPY102.00 before ending US trade near JPY101.90.

World oil prices lifted on Wednesday as an unexpected drop in US oil inventories and escalating tensions in Libya supported buying. Brent crude rose by US$1.07 or 1% to US$108.13 a barrel while US Nymex rose by US$1.27 to US$100.77 a barrel.

Base metal prices fell on the London Metal Exchange on Wednesday with lead (down 1.4%) and zinc (down 1.2%) recording the biggest falls. The Comex gold futures quote fell, down by US$19.70 an ounce to US$1288.90 per ounce. Iron ore fell by US90c a tonne or 0.9% to US$105.10 a tonne.

Ahead: In Australia employment data and the WA state budget are released. In the US, no economic data is expected. China releases trade figures.

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