Australian Stock Market Report – Morning October 17, 2014

Housing — Buildings at a government housing development in Caracas Venezuela Reuters/Stringer

* In US economic data, the Philadelphia Fed business activity index fell from 22.5 to 20.7 in October. Across the sub-indices new orders and prices paid lifted while employment eased. The NAHB Housing market index fell from 59 to 54 in October - the first decline in five months and suggested moderation in the pace of new construction. US industrial production rose by 1% in September, well above forecasts. Strength in mining and utilities drove the result. US jobless claims fell 23,000 to 264,000 last week.

* St Louis Fed President Bullard (hawkish) said the Fed may want to continue its bond buying stimulus for now given the drop in inflation expectations. Bullard argued that tapering was always going to be data-dependant and he still expected a rate hike in the March quarter 2015.

* European shares recovered on Thursday after hitting a 13-month low earlier in the session. Concerns about global growth continued to dominate sentiment. The relative strength index fell to 19.6 -a three year low, suggesting the market was oversold and supported bargain hunting late in the session. The STOXX Euro zone banking index fell 2.1% with the insurance sector down 1.3%. The FTSEurofirst 300 index lost 0.5% after initially falling 2.9%. The UK FTSE lost 0.3% and the German Dax gained 0.1%. And Australia's major miners lifted in London trade with shares in BHP Billiton up 0.6% while Rio Tinto gained 0.3%.

* US sharemarkets were mixed in choppy trade on Thursday. The better economic data helped to ease fears about the impact of a weakening global economy on US growth. Energy stocks rebounded after the recent selloff. The S&P 500 energy sector rose 1.7%. The Dow Jones closed down 25 points or 0.2% with the S&P 500 index flat while the Nasdaq rose 2 points or 0.1%.

* US treasury prices eased on Thursday (yields higher) as traders locked in profits after the prior sessions rally. US 2 year yields rose by 2 points to 0.34% while US 10 year yields were up 3 points to 2.17%.

* Major currencies were mixed against the greenback over the European and US session on Thursday. The Euro rose from lows near US$1.2705 to highs near US$1.2835, ending US trade near US$1.2795. The Aussie dollar fell from highs near US87.95c to lows around US86.95c, ending the US session near US87.55c. And the Japanese yen held between 106.40 yen per US dollar to JPY105.50, ending US trade near JPY106.35.

* World oil prices rose modestly on Thursday. Brent crude rose by US71c or 0.8% to US$84.49 a barrel while the US Nymex crude price rose by US92c or 1.1% to US$82.70 a barrel.

* Base metal prices were substantially weaker on Thursday with Zinc (down 2.6%), followed by nickel (down 2.3%). Other metals lost between 0.2%-1.8%. Gold fell with the Comex gold futures quote down by US$3.60 an ounce or 0.3% to US$1,241.20 per ounce. Iron ore fell by US$1.70 to close at US$80.50 a tonne.

Ahead: In Australia, no economic data is released. In the US housing starts, building permits and consumer confidence are released.

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