Australian Stock Market Report – Morning December 18, 2014

Retailer — Shoppers look over items on sale at a Macy's store in New York, November 23, 2012. Reuters/Keith Bedford

* In US economic data, consumer prices fell 0.3% in November - marking the largest decline since December 2008. Annual growth eased from 1.7% to 1.3%. The fall in gasoline prices (down 6.6% in November) was the biggest driver. Core CPI (ex food and energy) lifted up 0.1% in November to be up 1.7 over the year. US current account deficit rose from $98.42 billion to $100.36 billion in the September quarter.

* The US Federal Reserve kept interest rates on hold and offered a strong signal that it was on track to raise interest rates next year. The Fed said it would take a "patient" approach to raising interest rates. Fed forecasts: 2015 GDP growth unchanged 2.6%-3.0%, unemployment rate 5.2%-5.3% (down from 5.4%-5.6%), core inflation 1.5%-1.8% (down from 1.6%-1.9%).

* European shares once again managed to stage a late rebound on Wednesday driven by a rebound in energy stocks. Speculation of further stimulus by the ECB also boosted sentiment. The STOXX Europe 600 oil & gas index lifted by 3.3%. 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 rallied sharply on Wednesday after the Federal Reserve gave a strong signal that it was on track to raise interest rates at some point next year - pointing to confidence in the US economy. At the close of trade, the Dow Jones was up by 288 points or 1.7%. The S&P 500 index was up by 2% and the Nasdaq gained 96 points or 2.1%.

* US treasuries fell on Wednesday (yields higher) as the commentary from the US Fed opened the door further to interest rate hikes in 2015. US 2 year yields rose by 5pts to 0.609% while US 10 year yields rose by 7pts to 2.141%.

* Major currencies fell against the greenback in overnight trade. The Euro eased from highs of US$1.2495 to lows near US$1.2320, and was around US$1.2330 in late US trade. The Aussie dollar rose from lows near US81.40c to around US82.30 and traded near US82.20c in late trade. And the Japanese yen traded between 116.80 yen per US dollar to JPY117.70 and was near JPY117.25 in late US trade.

* World oil prices lifted on Wednesday as a drop in US oil inventories supported bargain hunting after nearly a week of selling. Brent crude rose by US$1.17 or 1.9% to US$61.18 a barrel while the US Nymex crude price rose by US54c or 1% to US$57 a barrel.

* Base metal prices were mixed on the London Metal Exchange on Wednesday. Tin (down 3%)and nickel (down 2.4%) recorded the largest falls while aluminium managed to eke out a 0.8% gain. Gold rose with Comex gold futures up by US20c an ounce or to US$1,194.50 per ounce. Iron ore fell by US20c to US$67.90 a tonne on Wednesday.

Ahead: In Australia, financial accounts and population data for the September quarter are released. In the US, the leading index and retail trade figures are released.

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