Australian Stock Market Report – Morning July 9, 2014

Consumers — A woman stands in front of a luxury brand store as people walk past at a shopping district in Tokyo June 26, 2014. Japan's core consumer inflation eased slightly in May when excluding the effect of a sales tax hike, and is seen to be slowing in the coming months as the boost from a weak yen fades, keeping the central bank under pressure to maintain its massive stimulus. Picture taken June 26, 2014. REUTERS/Yuya Shino (JAPAN - Tags: BUSINESS)

A woman stands in front of a luxury brand store as people walk past at a shopping district in Tokyo June 26, 2014. Japan's core consumer inflation eased slightly in May when excluding the effect of a sales tax hike, and is seen to be slowing in the coming months as the boost from a weak yen fades, keeping the central bank under pressure to maintain its massive stimulus. Picture taken June 26, 2014. REUTERS/Yuya Shino (JAPAN - Tags: BUSINESS)

Morning Report
(06:10 AEST)

In US economic data, consumer credit rose by $19.6 billion in May - in line with expectations. US Minneapolis Fed President Kocherlakota (voter, dove) spoke overnight, saying that the improvement in the unemployment rate overstates the degree of healing in the labour market. In addition he stated that it was more likely inflation would come in below the Fed´s 2% target over the next year than above it.

European shares fell on Tuesday on weaker than expected German export data. German banks became the latest lenders to negotiate a costly settlement with US authorities for dealing with blacklisted companies. Media reports claimed that Commerzbank´s (down 5.6%) settlement was expected to include at least $500 million in penalties. Euro zone banks fell 2.8%. The FTSEurofirst 300 index fell by 1.3%, the German Dax lost 1.4% while the UK FTSE fell by 1.3%. Australia´s major miners finished lower in London trade with shares in BHP Billiton down by 1.0% while Rio Tinto lost 0.1%.

US sharemarkets fell on Tuesday in a broad-based sell-off as investors showed caution ahead of the start of earnings season. According to Thompson Reuters profits for the S&P 500 are expected to grow 6.2% in the second quarter down from the 8.4% forecast at the start of April. Alcoa is set to report results after the close of US trade. Nine of the 10 S&P 500 sectors were lower, with only the defensive utilities sector higher. The Dow Jones fell by 118 points or 0.7% with the S&P 500 index down by 0.7% and the Nasdaq lost 60 points or 1.4%.

US treasury prices rose on Tuesday (yields lower) with weaker German data stoking demand for safe-haven bonds. Traders were also waiting on the $27 billion auction of 3yr notes. US 2 year yields fell by 2pts to 0.51% while US 10 year yields fell by 5 points to 2.56%.

Major currencies rose against the US dollar on Tuesday. The Euro rose from lows near U$1.3585 to highs near US$1.3615, closing US trade near US$1.3610. The Aussie dollar rose from lows near US93.80c to highs near US94.15c and ended US trade near US94.05c. And the Japanese yen lifted from 101.85 yen per US dollar to JPY101.50, ending US trade near JPY101.55.

World oil prices fell on Tuesday with all manner of fears about supply disruptions failing to be realised into actual reductions in production or exports from key Middle East producers. Brent crude fell for the seventh straight session, down by US$1.25 or 1.1% to US$108.99 a barrel and the US Nymex price closed lower by US23c or 0.2% to US$103.40 a barrel.

Base metal prices were mostly higher on the London Metal Exchange on Tuesday with the exception of tin (down 0.8%). Nickel lifted most, up 2.3%, and lead, aluminium and zinc all gained 1.1%. The Comex gold futures quote fell by US50 to US$1,316.50 per ounce. Iron ore rose by US60c a tonne or 0.6% to US$96.50 a tonne.

Ahead: In Australia, consumer confidence data is released. In China, data on producer and consumer prices is released. In the US, the weekly mortgage market index is released together with minutes of the June 17/18 Federal Reserve meeting.

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