Australian Stock Market Report – Morning December 17, 2014

A man works atop of a building constructing site in Tokyo December 15, 2014. Japanese big manufacturers' sentiment worsened slightly in the three months to December but corporate spending plans were strong, a closely watched central bank survey showed, highlighting the uneven recovery brought by premier Shinzo Abe's stimulus policies. REUTERS/Yuya Shino (JAPAN - Tags: POLITICS BUSINESS CONSTRUCTION)

* In US economic data, housing starts fell by 1.6% in November to a 1.028 million unit pace. Building permits fell by 5.2% in November. Despite the mild pullback the housing sector continues to see healthy improvement. The Markit Flash PMI eased from 54.8 to 53.7 in December - a 11 month low. A reading above 50 still signalled an expansion in activity. Across the sub-indices output and employment expanded at a slower pace.

* European shares managed to stage a late rebound on Tuesday as the Russian rouble recovered against the US dollar and oil prices also bounced of 5½-year lows. Trading volumes were nearly 80% higher than the average over the past three months. The FTSEurofirst 300 index rose by 1.9%, the German Dax also gained

1.9%, while the UK FTSE rose by 2.4%. In London trade shares in BHP Billiton gained 3.3% while Rio Tinto rose 4.2%.

* US sharemarkets fell sharply in the last hour of trade on Tuesday. A mild rebound in the oil price supported energy shares. The S&P energy sector outperformed rising by 2.4% before closing up 0.6%. Investors also waited on the US Federal Reserve ahead of the FOMC rates decision which is released tomorrow. At the close of trade, the Dow Jones was down by 110 points or 0.6%. The S&P 500 index was down by 0.8% and the Nasdaq lost 57 points or 1.2%.

* US treasuries rose on Tuesday (yields lower) as the ongoing weakness in oil prices spurred demand for safe-haven US government bonds. Traders also awaited on the US FOMC meeting, which takes place over the next two days. US 2 year yields fell by 2pts to 0.561% while US 10 year yields fell by 6pts to 2.056%.

* Major currencies were mixed against the greenback in European and US trade on Tuesday. The Euro rallied from lows near US$1.2445 to highs near US$1.2560, and was around US$1.2510 in late US trade. The Aussie dollar fell from highs near US82.70c to around US82.00 and traded near US82.15c in late trade. And the

Japanese yen traded between 115.65 yen per US dollar to JPY117.65 and was near JPY117.15 in late US trade.

* World oil prices bounced of 5½-year lows on Tuesday as traders continued to speculate on the likelihood of OPEC oil supply cuts. US options expiry also added to the volatility in oil prices. Brent crude fell by US$1.17 or 1.9% to US$59.75 a barrel while the US Nymex crude price rose by US53c or 0.9% to US$56.46 a barrel.

* Base metal prices were weaker on the London Metal Exchange on Tuesday. The contraction in Chinese factory activity weighed on prices . Nickel lost 2.7% while lead gave back 2.5%. Other metals fell between 0.6%-1.9%. Gold fell with Comex gold futures down by US$13.40 an ounce or 1.1% to US$1,194.30 per ounce. Iron ore fell by US50c to US$68.10 a tonne on Tuesday.

Ahead: In Australia, no economic data is released. In the US, CPI data and the FOMC rates decision is handed down.

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