Australian Stock Market Report – Morning December 2, 2014

Car manufacturing — A worker assembles a car at a Nissan's manufacturing plant in Rosslyn, outside Pretoria, September 11, 2009. Reuters/Siphiwe Sibeko

* In US economic data, the ISM manufacturing index eased from 59.0 to 58.7 in November, above forecasts for a result near 57.8.

* European shares eased on Monday as investors reacted to Friday's sharp fall in commodity prices by reducing interest in mining and oil stocks. The FTSEurofirst 300 index fell by 0.5%, the German Dax fell for the first time in 13 days, down by 0.2%, while the UK FTSE fell by 1.0%. In London trade shares in BHP Billiton fell by 2.2% while Rio Tinto lost 1.2%.

* US sharemarkets fell at the open of trade but promptly rebounded. Higher gold and oil prices led to a recovery in resource stocks. The latest economic data comforted investors. But shares in Apple fell by 3.3%, weighing on the technology sector. Comments by New York Federal Reserve president William Dudley in afternoon trade that wages may be set to rebound, induced further selling. The Dow Jones was down 102 points at the start of trade but at the close the Dow was lower by 51 points or 0.3%. The S&P 500 index was down by 0.7% while the Nasdaq lost 64 points or 1.3%.

* US treasuries fell on Monday (yields higher) as commodity prices rebounded (easing deflation jitters) and economic data came in stronger than expected. US 2 year yields rose by 2 points to 0.496% while US 10 year yields rose by 5 points to 2.22%.

* Major currencies were stronger against the greenback in European and US trade on Monday. The Euro rose from lows near US$1.2420 to near US$1.2505 and was around US$1.2475 in late US trade. The Aussie dollar rose from lows near US84.25c to around US85.30c and was around US85.00c in late US trade. And the Japanese yen lifted from 119.10 yen per US dollar to JPY117.87 and was near JPY118.36 in late US trade.

* World oil prices rebounded on Monday. Data showed that lower oil prices make be affecting more marginal production with a 15% drop in permits issued for new US shale oil wells in October. A weaker US dollar also served to boost commodity prices. A weaker greenback improves the purchasing power of European and Asian buyers for dollar-denominated commodities. Brent crude rose by US$2.39 or 3.4% to US$72.54 a barrel. The US Nymex crude price rose by US$2.85 or 4.3% to US$69.00 a barrel.

* Base metal prices rose by up to 1.7% on the London Metal Exchange on Monday with copper leading the gains while the tin price rose just 0.2%. Gold rose sharply on Monday with Comex gold futures up by US$42.60 an ounce or 3.6% to US$1,218.10 per ounce. Iron ore rose by US80c to US$70.60 a tonne on Monday.

Ahead: In Australia, the Reserve Bank Board meets. Data on government finance is released with building approvals, weekly consumer confidence and the balance of payments. In the US, data on auto sales is released with construction spending and weekly chain store sales data.

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