Australian Stock Market Report – Morning 7/4/13

MORNING REPORT
(6.45am AEST)

In US economic news, ISM non-manufacturing survey eased from 53.7 to 52.2 in June- the lowest level since Feb 2009 and does suggest that momentum in the US economy is slowing. Interestingly the employment sub-index recorded a healthy improvement. The labour market remains the key.

The trade deficit widened from $40.1b to $45.0b in May, largely on the back of a jump in imports. ADP private sector job gains rose from 134k to 188k in June. This was the highest since February and encouraging ahead of the payrolls print on Friday.

European shares fell on Wednesday as deepening political concerns in Portugal threatened to reignite the euro zone crisis. Fears that a snap election could derail plans for Portugal to exit the EU and IMF bailout next year resulted in Portugal 10yr bond yields rising above 8pct and its sharemarket lost 5pct with the financial sector down over 10pct. The euro zone banking index fell 1.8pct. The FTSEurofirst 300 index fell 0.7pct with the German Dax down by 1pct while the UK FTSE lost 1.2pct. Mining shares were weaker in London trade with BHP Billiton down by 2.2pct while Rio Tinto lost 1.7pct.

US share markets ended slightly higher in a volatile holiday shortened session on Wednesday. Volumes were light ahead of the Independence Day holiday. Health stocks were in focus after the Obama administration said it wouldn´t require employers to provide health insurance for workers will 2015. The Dow Jones rose by 56pts or 0.4pct with the S&P 500 up 0.1pct while the Nasdaq rose 10pts or 0.3pct.

US treasuries fell on Wednesday (yields higher) in a holiday shortened session as traders waited on the payrolls numbers out on Friday. . US 2yr yields rose by 1pt to 0.36pct and US 10yr yields rose by 3pts to 2.50pct.

The US dollar was mixed against major currencies on Wednesday. The Euro hit early lows near US$1.2925 before rising to highs near US$1.3015 and ending US trade near US$1.3005. The Aussie dollar fell from highs near US91.00c to lows around US90.50c and ended US trade near US90.65c. And the Japanese yen traded between 100.80 yen per US dollar and JPY99.30, before ending US trade at JPY99.85.

World crude oil prices rose on Wednesday hitting a 14-month high as turmoil in the Middle East unsettled investors. US oil inventories fell by a surprising 10 million barrels in the past week, further supporting prices. Brent crude rose by US$1.76 or 1.7pct to US$105.76 and US Nymex crude rose by US$1.64 or 1.6pct to US$101.24 a barrel.

Base metal prices were mostly weaker in London trade on Wednesday as a generally stronger US dollar weighed on prices. Copper was the exception gaining 1.1pct. And the gold price rose on Wednesday. Comex August futures price rose by $8.50 an ounce or 0.7pct to US$1,251.90 per ounce. And the iron ore price rose by US$1.20 to US$120.50 tonne.