Global Markets Overview - 11/22/2011

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MORNING REPORT
(8am AEDT)

From Craig James, Commsec Chief Economist

US existing home sales rose by 1.4pct to an annual rate of 4.97 million in October. Economists had expected sales to fall to a result near 4.80 million. The National Association of Realtors said that the proportion of distressed sales eased from 30pct to 28pct. Home prices are down 4.7pct on a year ago. And the inventory of homes fell from 8.3 months to 8.0 months.

European shares fell to the lowest levels since early October on Monday. Moody´s Investors Service expressed concern about rising French bond yields and the implications for the country´s credit rating. And investors expressed disappointment that the ´´super committee´´ in the US had failed to come up with deficit reduction measures. The FTSEurofirst index fell by 3.3pct with the UK FTSE down by 2.6pct while the German Dax lost 3.4pct.

US shares slumped on Monday on on-going worries about budget deficits in Europe and the US. In merger news, Alleghany Corp said it will buy Transatlantic Holdings for around US$3.4 billion. And Gilead Sciences has agreed to buy Pharmasset for $11 billion in cash. At the close the Dow Jones was lower by 248pts or 2.1pct, although it was down 342 points at one stage. The S&P 500 was down 1.9pct and the Nasdaq was down by 49pts or 1.9pct.

US treasuries rose on Monday (yields lower) as investors shifted from equities and commodities to US government bonds. US 2yr yields fell by 2pts to 0.27pct and US 10yr yields fell by 4pts to 1.97pct.

Major currencies were mixed again against the greenback over the European and US trading sessions on Monday. The Euro fell from near US$1.3520 in early European trade to US$1.3430 but then rebounded in early US afternoon trade to near US$1.3540. In late US trade the euro was near US$1.3500. The Aussie dollar fell from highs around US99.80c to US98.10c, and was near US98.60c in late US trade. And the Japanese yen eased from JPY76.75 yen per US dollar to JPY77.00, ending US trade near JPY76.90.

US crude oil prices fell in line with other commodities on recession fears in Europe. Adding to the bearish tone, Chinese Vice-Premier Wang Qishan has warned of the risk of a global economic recession and said that China must focus on its own domestic problems. Nymex crude oil fell by US77c or 0.8pct to US$96.92 a barrel and London Brent crude fell by US68c to US$106.88 a barrel.

Base metal prices fell on the London Metal Exchange on Monday in line with other commodities as investors fretted about the economic outlook in Europe. Prices fell between 2.1-4.1pct but nickel bucked the trend, up 0.8pct. And the gold price fell as investors liquidated positions to fund losses in equities markets. The Comex December gold price fell by US$42 an ounce or 2.4pct to US$1,683.10.

Ahead: In Australia, no major economic data is released. In the US, updated GDP (economic growth) figures are released together with the Richmond Fed manufacturing index.