Australian Stock Market Report – Morning June 16, 2014

Morning Report
(05:10 AEST)

In US economic data, producer prices fell by 0.2% in May with the core measure (excludes food and energy) down by 0.1%. Economists had expected 0.1% gains for both measures. Consumer sentiment fell from 81.9 to 81.2 in June, below forecasts centred on 83.0.

European shares eased modestly on Friday as investors continued to watch geopolitical developments in Iraq. But investors were comforted by stronger-than expected Chinese economic data. The FTSEurofirst 300 index was down by 0.2% with the German Dax down by 0.3% while the UK FTSE lost 1.0%. The UK market was also depressed by fears of higher interest rates. Australia´s major miners were lower in London trade with shares in BHP Billiton down by 1.0% while Rio Tinto lost 1.3%.

US sharemarkets rebounded on Friday with investors comforted by a revenue upgrade by Intel and positive Chinese economic data. Shares in Intel rose by 6.8%. The Dow Jones rose by 41.6 points or 0.3% with the S&P 500 index up by 0.3% and the Nasdaq lifted by 13 points or 0.3%. Over the week the Dow Jones index fell by 0.9% with the S&P500 index down by 0.7% while the Nasdaq lost 0.3%.

US long-term treasury prices were little changed on Friday. Economic data was mixed and some investors drifted back to equities and commodities markets and away from safe-haven government bonds. US 2 year yields were up by 1 point to 0.455% while US 10 year yields were flat near 2.61%. Over the week US 2 year yields rose by almost 3 points and US 10 year yields rose by almost 1 point.

Major currencies eased modestly against the US dollar over the European and US sessions on Friday, clawing back some of the losses of the previous day. The Euro eased from highs near U$1.3580 to US$1.3520, and closed US trade around US$1.3540. The Aussie dollar eased from highs near US94.20c to around US93.75c before finishing US trade around US94.00c. And the Japanese yen eased from 101.80 yen per US dollar to JPY102.10, ending US trade near JPY102.05.

World oil prices rose to fresh 9-month highs on continued fears that the violence in Iraq - the world´s second largest oil exporter - could threaten global oil supplies. Brent crude rose by US39c or 0.3% to US$113.41 a barrel with US Nymex up by US38c or 0.4% to US$106.91 a barrel. Over the week Brent rose by US$4.80 or 4.4% with Nymex up by US$4.25 or 4.1%.

Base metal prices were higher by up to 0.7% on Friday with zinc leading the way. Over the week metal prices fell up to 4.4% (nickel) although copper fell only 0.2%. The Comex gold futures quote rose by US10c an ounce to US$1,274.10 per ounce. Over the week gold rose by US$21.60 or 1.7%. Iron ore fell by US60c a tonne or 0.7% on Friday to US$90.90 a tonne. Over the week iron ore fell by US$3.60 a tonne.

Ahead: In Australia, no major economic data is scheduled on Monday. In the US, industrial production, capital flows data, the NAHB housing market index and New York Federal Reserve manufacturing surv