Australian Stock Market Report – Morning August 13, 2014

The headquarters of Commerzbank AG is seen in Frankfurt in this February 13, 2014 file photo. Germany's second biggest lender Commerzbank on August 7, 2014 said it is speeding up the clean up of non-core assets as it posted an increase in second-quarter earnings. REUTERS/Ralph Orlowski/Files (GERMANY - Tags: BUSINESS LOGO)

* In European economic news, Germany ZEW economic sentiment index fell from 27.1 to 8.6 - the lowest level in 18 months and well below expectations. The ZEW current conditions index fell from 61.80 to 55.5. No surprise that the weakness was driven by the escalation of tensions between Russia and the West. News reports suggest a growing number of the 6,200 German firms active in Russia are warning about a hit to their business. The survey was based on 222 analysts and investors, and conducted between July 28 - August 11.

* European shares fell on Tuesday as weak German sentiment data added to concerns of a slowdown in the region. Consumer goods group Henkel (down 5.3%) warned earnings growth would slow in the second half of the year, partly because of the friction between Russia and Ukraine. The FTSEurofirst 300 index fell by 0.2% with the German Dax lost 1.2% and the UK FTSE closed mostly flat. Australia's major miners were mixed in London trade with shares in BHP Billiton down 0.5% while Rio Tinto rose 0.4%.

* US sharemarkets eased on Tuesday, pressured by a slide in energy shares and worries over the weakness in the Euro zone. Losses were broad with seven of the 10 S&P sectors weaker. The Dow Jones index fell by 9 points or 0.1% with the S&P 500 index down by 0.2% while the Nasdaq lost 12 points or 0.3%.

* US treasury prices were mixed as traders waited on upcoming auctions of a combined $40 billion of 10yr and 30yr notes later this week. US 2 year yields fell by 2 points to 0.44% while US 10 year yields rose by 1 point to 2.45%.

* The Euro and commodity currencies were mixed against the US dollar as traders continued to worry about the impact of the Russia-Ukraine conflict on broader Euro zone growth. The Euro fell from highs near US$1.3370 to around US$1.3335 - a nine month low, before recovering and ending US trade near US$1.3365. The Aussie dollar rose from lows near US92.50c to highs near US92.75c, ending the US session near its highs. The Japanese yen traded in a tight range between 102.35 yen per US dollar to JPY102.10, ending US trade near JPY102.20.

* World oil prices fell on Tuesday. Brent fell to a 13-month low as increased OPEC oil production dampen concerns over supply disruptions in Iraq and Libya. OPEC output hit a five month high of 30.44 million barrels per day in July with a 300,000 bpd rise led by Saudi Arabia and Libya. Brent crude fell by US$1.55 or 1.5% to US$103.02 a barrel while the US Nymex price fell by US71 cents a barrel to US$97.37 a barrel.

* Base metal price were mostly higher in Monday with the exception of copper (down 0.4%). Zinc led the gains up 1.1%. Gold prices rose slightly on Tuesday with the Comex gold futures quote up by US10c to US$1,310.60 per ounce. Iron ore fell by US$1.30 on Tuesday or 1.4% to US$94.00 a tonne.

Ahead: In Australia, consumer confidence and wage price data for the June quarter are released. In the US, advanced retail sales and business inventories are released. Chinese retail sales, industrial production and fixed asset investment are scheduled.

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