MORNING REPORT
(6am AEST)

US consumer prices rose by 0.3pct in March with core prices (excludes food and energy) up by 0.2pct. Both results were in line with expectations. Consumer sentiment eased from 76.2 to 75.7 in April, below forecasts centred on a result near 76.2.

China´s central bank has widened the yuan daily trading band from plus/minus 0.5pct to plus/minus 1pct effective Monday.

European shares fell for the first time in two days on renewed jitters about euro zone sovereign debt. Banks led the declines with Italy´s UniCredit down 6pct and France´s Societe Generale down 5.8pct. The benchmark FTSEurofirst 300 index fell by 1.6pct with the German Dax down 2.4pct. The UK FTSE lost 1.0pct. Over the week the FTSEurofirst 300 index fell for the fourth straight week, dropping by 2.3pct.

US sharemarkets fell on Friday with the fresh euro zone debt jitters rubbing off on US banking stocks. Despite their earnings beating expectations, shares in JP Morgan fell 3.6pct with Wells Fargo lower by 3.5pct. The S&P financial sector index fell by 2.5pct. At the close of trade, the Dow Jones was lower by 137pts or 1.1pct with the S&P 500 down by 1.3pct while the Nasdaq lost 44pts or 1.5pct. Over the week the Dow fell by 1.6pct with the S&P 500 down 2.0pct and the Nasdaq lost 2.2pct.

US treasuries rallied on Friday (yields lower) as investors embraced safe-haven assets like US government bonds. US 2yr yields fell almost 2pts to 0.27pct and US 10yr yields fell by 7pts to 1.99pct. Over the week US 2yr yields fell by 5pts and US 10yr yields fell by 7pts. Aussie 10yr bonds are near 50-year lows.

The Euro and commodity currencies fell in late European and US trade as investors embraced safe-haven assets. The Euro fell from highs around US$1.3180 to lows near US$1.3065 and ended US trade at US$1.3075. The Aussie dollar fell from highs around US104.25c to US103.55c and ended US trade near US103.70c. And the Japanese yen traded between 80.83 yen per US dollar to JPY81.12 and was near JPY80.89 in late US trade.

Benchmark crude oil prices were mixed on Friday. US oil prices fell in response to a stronger US dollar and soft Chinese GDP data. US Nymex crude fell by US81c or 0.8pct to US$102.83 a barrel and fell 48c on the week. Expiring front month London Brent crude rose by US12c to US$121.83 a barrel and was down 1.3pct on the week.

Base metal prices were weaker on the London Metals Exchange on Friday. Investors reduced holdings of growth assets like equities and commodities as a result of new euro zone jitters and softer-than-expected Chinese GDP data. Metals fell between 1.7-2.8pct. Over the week metals lost up to 4.3pct (tin) but lead and nickel were flat. And the gold price followed the oil price lower. The stronger US dollar added to the weakness with the June Comex gold futures price lower by US$20.40 or 1.2pct to US$1,660.20 an ounce. Gold was up 1pct in the week.

Ahead: In Australia, data on lending finance is released. In the US, data on retail sales, capital inflows and business inventories are released together with the NAHB housing market index