Australian Stock Market Report – Morning 6/20/13

MORNING REPORT

(6.45am AEST)

In US economic news, Federal Reserve Chairman Bernanke reiterated its commitment to buying $85 billion in bonds per month given still-high unemployment. However the Fed did highlight that risks to growth and employment have lessened in recent months and as such it was likely that it could slow the pace of its bond purchases later this year and look to end the QE program by mid-2014. The Fed will not raise interest rates until unemployment fall below 6.5pct or provided inflation remains below 2.5pct. Most market participants are not anticipating rate hikes till 2015.

European shares ended slightly lower on Wednesday in thin trading as investors waited on clues from the US Federal Reserve about whether or not it will soon start to wind down its stimulus measures. Nokia was amongst the biggest gainers (up 3.4pct) on news that China´s Huawei Technologies may consider buying the Finnish phone manufacturer. The FTSEurofirst 300 index fell by 0.3pct with the German Dax down by 0.4pct while the UK FTSE fell by 0.4pct. Mining shares were lower in London trade with BHP Billiton up by 0.5pct while Rio Tinto lost 0.4pct.

US sharemarkets fell sharply on Wednesday after confirmation the US central bank would start to taper its bond buying program later this year if the economy was strong enough. The Dow Jones lost 206pts or 1.4pct with the S&P 500 down by 23pts or 1.4pct while the Nasdaq lost 39pts or 1.1pct.

US treasuries fell on Wednesday (yields higher), as the Fed confirmed an exit strategy to QE program. US 2yr yields rose by 4pt to 0.31pct and US 10yr yields rose by 16pts to 2.35pct.

The US dollar rallied against major currencies on Wednesday as the Fed offered a brighter assessment of the US economic landscape. The Euro fell from highs US$1.3410 to lows near US$1.3275 ending US trade near its lows. The Aussie dollar fell from highs near US95.45c to lows around US92.90c and ending US trade near its lows. And the Japanese yen eased from 94.85 yen per US dollar to JPY96.90, before ending US trade at JPY96.55.

World crude oil prices ended mixed in a choppy trading session on Wednesday. A larger than expected build in US oil inventories hurt prices. US crude stockpiles rose by 313,000 barrels last week against expectations for a 500,000 barrel decline. Brent crude rose by US10c or 0.1pct to US$106.12 and US Nymex crude fell by US20c or 0.2pct to US$98.24 a barrel.

Base metal prices were mixed in London trade on Wednesday as traders awaited on the Fed´s decision following the two-day policy meeting. Copper lost a further 0.6pct to fresh six-week lows, while nickel gained 0.4pct. And the gold price fell on Wednesday on the back of the stronger US dollar. Comex August futures price fell by $6.90 an ounce or 0.5pct to US$1,360 per ounce - a four week low. And the iron ore price rose by US$2.30 to US$120.00 a tonne.

Ahead: In Australia demographic statistics are released. In the US, existing home sales, the Philadelphia Fed index are released. Flash manufacturing readings are released across the globe.

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