Australian Stock Market Report – Morning August 26, 2014

Housing — Buildings at a government housing development in Caracas Venezuela Reuters/Stringer

* In US economic data, new home sales fell by 2.4% in July to a four month low. New home sales are up 12.3% on a year ago. A lift in the stock of properties on the market and slower price gains should help stimulate demand in months ahead. The Markit Services Purchasing Managers Index dipped from 60.8 to 58.5 in July.

* European shares rallied on Monday on growing speculation that the ECB would move to boost growth if inflation slows further. Euro zone investors got their first opportunity to react to Mario Draghi's comments on Friday, which reiterated the ECB's commitment to do whatever it takes to foster stronger growth. UK markets were closed for the Summer Bank Holiday. The FTSEurofirst 300 index rose by 1.1% with the German Dax down by 0.7%.

* US sharemarkets rose on Monday with the S&P 500 briefly lifting above 2,000 points for the first time. Bio techs and financial stocks lifted the benchmark index to a record high. InterMune shares surged 35% and helped lift the bio tech sector after it agreed to be acquired by Roche Holding AG for $8.3 billion in cash. In further M&A activity Burger King (up 20%) was in talks to acquire Canadian coffee and doughnut chain Tim Hortons (up 21%) in a deal that would be structured to move Burger King's domicile to Canada, which has lower overall corporate taxes. The Dow Jones index rose by 76 points or 0.4% with the S&P 500 index up by 0.5% while the Nasdaq actually gained almost 19 points or 0.4%.

* US treasury prices rose slightly on Monday (yields lower) in light trade. The lift in prices was in line with the rally in European bonds on expectations the ECB will look at further stimulus measures. Weaker German sentiment and French political issues increased safety bid. US 2 year yields fell by 1 point to 0.49% while US 10 year yields fell by 2 points to 2.39%.

* Major currencies ended weaker against the US dollar after European and US sessions on Monday. The Euro fell from highs near US$1.3210 to around US$1.3185, before ending US trade near US$1.3190. The Aussie dollar eased from highs near US93.25c to lows near US92.90c ending the US session near its lows. And the Japanese yen eased from 104.25 yen per US dollar to JPY103.85, ending US trade near JPY103.95.

* World oil prices were mixed on Monday as geopolitical tensions in Ukraine and Libya offset ample supplies weaker data out of the US. Brent crude rose by US36c or 0.4% to US$102.65 a barrel and the US Nymex price eased by US30c a barrel or 0.3% to US$93.26 a barrel.

* Base metals did not trade do to the UK holiday. Gold prices fell on Monday with the Comex gold futures quote down by US$1.30 or 0.1% to US$1,278.90 per ounce. Iron ore fell by US90c or 1.0% on Monday to US$89.20 a tonne.

Ahead: In Australia, no major economic data is scheduled. In the US, durable goods orders and consumer confidence figures are released.

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