Australian Stock Market Report – Morning October 28, 2014

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

* In the US, pending home sales rose by 0.3% in September after falling by 1% in August. US building permits were revised higher to a lift of 2.8% in September (previously 1.5%). The Markit "flash" service sector PMI slipped from 58.9 to 57.3 in October - the lowestresult since April.

* European shares fell on Monday as investors locked in gains following a drop in German business sentiment. The IFO business climate index fell from 104.7 to 103.2. The European Central Bank stress tests showed that 25 out of 130 banks failed ECB capital tests late last year, but most have managed to repair their finances. The FTSEurofirst 300 index closed down by 0.6%. The UK FTSE lost 0.4% and the German Dax fell by 1%. And Australia's major miners were lower in London trade with shares in BHP Billiton down by 1.0% while Rio Tinto lost 0.8%.

* US sharemarkets were mixed as energy stocks fell in response to the lower oil price. The S&P Energy sector lost 2.2% after Nymex crude dipped below US$80 a barrel. Shares of Brazilian companies trading in the US fell in response to the re-election of President Rousseff. Petrobras lost 14.1% while Vale lost 6.5%. The Dow Jones rose by almost 13 points or 0.1% with the S&P 500 index down by 0.2% while the Nasdaq rose by 2 points or 0.1%.

* US treasury rose modestly on Monday (yields lower). Weak economic data and the steep drop in Brazil's stock market following the re-election of the incumbent leftist President Rousseff supported safe-haven demand. US 2 year yields were down by 2 points to 0.382% while US 10 year yields were down by 1 point to 2.26%.

* Major currencies were mixed against the greenback over European and US sessions on Monday. The Euro rose from lows near US$1.2665 to highs near US$1.2720, ending US trade near US$1.2705. The Aussie dollar fell from highs near US88.15c to lows near US87.85c before settling and ending the US session near US88.00c. And the Japanese yen held between 108.10 yen per US dollar and JPY107.60, ending US trade near JPY107.75.

* World oil prices eased on Monday in choppy trade. Broker downgrades for oil and weak economic data kept prices under pressure. Brent crude fell by US75c to US$85.38 a barrel while the US Nymex crude price fell below US$80 a barrel to a 28-month low before recovering to close down US1c to US$81 a barrel.

* Base metal prices were mostly higher on the London Metal Exchange on Monday with the exception of nickel (down 1.5%). Other metals rose between 0.6%-0.9%. Gold fell on Monday with the Comex gold futures quote down by US$2.50 an ounce or 0.2% to US$1,229.30 per ounce. Iron ore was down by US20c on Monday or 0.3% to US$79.60 a tonne.

Ahead: In Australia, weekly consumer sentiment is released. In the US, durable goods orders and consumer confidence are released.

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