Australian Stock Market Report – Morning 6/7/13

MORNING REPORT
(6.15am AEST)

In US economic news, initial jobless claims fell by 6,500 to 346,000 in the final week of May. Net financial wealth grew by $3 trillion to $70.3 trillion - the biggest quarterly increase in 14-years. Rising stock prices and home pushed net household wealth to a fresh record high. US ICSC chain store sales rose by 3.2pct in May compared with a year ago.

European shares reversed early gains to close lower on Thursday. Banking stocks led the declines after the ECB failed to satisfy hopes for fresh policy action. ECB President Draghi ruled out unconventional measures such as negative interest rates despite expecting that the euro zone economy would contract by 0.6pct this year. The European banking index fell 2.3pct. The FTSEurofirst 300 index fell by 1.2pct while the German Dax also lost 1.2pct and the UK FTSE fell by 1.3pct. Mining shares were weaker with BHP Billiton down by 1.2pct in London trade while Rio Tinto lost 2.4pct.

US sharemarkets closed higher in choppy trade on Thursday, with the S&P 500 recovering after brief break below its 50-day moving average. Defensive sectors led the afternoon rally. Retail stocks were also stronger after major US chains reported healthy retail activity. The Dow Jones rose by 80pts or 0.5pct. The S&P 500 rose by 0.9pct and the Nasdaq gained 23pts or 0.7pct.

US treasuries rose slightly on Thursday (yields lower) as a drop in the US dollar boosted demand for US government debt. But gains were limited ahead of Friday´s jobs report. US 2yr yields fell by 1pt to 0.29pct and US 10yr yields fell by 2pts to 2.07pct.

The US dollar fell sharply against major currencies in European and US trade on Thursday. Investors aggressively sold of the US dollar on growing speculation that the jobs data would disappoint and prompt the Federal Reserve to keep stimulus in play. The Euro rose from US$1.3105 to highs near US$1.3285 before ending US trade near US$1.3245. The Aussie dollar rose from lows near US94.40c to US96.40c and ended US trade near US96.15c. And the Japanese yen strengthened from 99.45 yen per US dollar to JPY96.20, before ending US trade at JPY97.05.

World crude oil prices were higher on Thursday as Britain´s largest oilfield was shut down for the second time in less than a week. A weaker US dollar also supported the bid for oil. Brent crude rose by US57c or 0.6pct to US$103.61 and US Nymex crude rose by US$1.02 or 1.1pct to US$94.76 a barrel.

Base metal prices were weaker in London trade on Thursday with lead down by 2.6pct and copper down 1.7pct. The gold price rose on Thursday as the sharp fall in the US dollar supported the foreign demand for gold. The Comex August futures rose by $17.30 an ounce or 1.2pct to US$1,415.80 per ounce. But the iron ore price fell by US$2.70 on Thursday or 2.4pct to US$113.90 a tonne.

Ahead: In Australia, no economic data is released. In the US, non-farm payrolls are released.

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