Australian Stock Market Report – Morning 1/10/14

MORNING REPORT
(8am AEDT)

In US economic news, monthly chain store sales rose 3.7% in December after increasing by 2.1% in November. US jobless claims fell by 15,000 to 330,00 in the past week.

The European Central Bank left its main interest rate unchanged at a record low of 0.25% on Thursday. ECB President Draghi was cautious about the European economic recovery and hinted that there may be down revisions its inflation forecasts. However he did say that the ´´risks surrounding the economic outlook for the euro area continue to be on the downside´´ and that Euro zone economic activity should benefit from ´´a gradual strengthening of demand for exports´´.

European shares were weaker on Thursday, hit by a warning over France´s debt level. Didier Migaud, head of the French public audit office, said French national debt had reached a ´´danger zone´´. France´s CAC was the worst performing market falling 0.8%. Italy´s FTSE MIB outperformed with a rise of 0.3%. The FTSEurofirst 300 index fell by 0.4% with the UK FTSE lower by 0.5% and the German Dax fell by 0.8%. Mining shares were weaker with BHP Billiton shares down 2.2% in London trade while Rio Tinto fell by 2.4%.

US share markets declined on Thursday as investors waited for the key non-farm payrolls figures released on Friday. The upbeat jobless claims figures added to uncertainty on how aggressively the US Federal Reserve may taper stimulus. At the close of trade, the Dow Jones was down 18 points or 0.1%, while the S&P 500 was flat and the Nasdaq fell by 9 points or 0.2%.

US long-dated treasury prices rose on Thursday (yields lower), following a solid $13 billion auction of 30-year bonds. US 2 year fell 1 point to 0.43% while US 10 year yields fell by 3 points to 2.96%.

The Euro rebounded after an initial sell-off against the US dollar on Thursday, following cautious comments from ECB President Draghi. The Euro hit early highs around US$1.3630 before falling sharply to lows near US$1.3550 and was trading around US$1.3605 in afternoon US trade. The Aussie dollar rose from lows near US88.65c to highs near US88.95c, and held near US89.00c in late US trade. And the Japanese yen traded between 105.05 yen per US dollar and JPY104.60 and was trading near 104.75 in afternoon US trade.

World oil prices fell on Thursday following news of better oil production out of Libya and increase US oil inventories. Brent crude fell by US82c or 0.8% to US$106.33 a barrel while US Nymex crude fell by US67c or 0.7% to US$91.66 a barrel.

Base metal prices were weaker on the London Metal Exchange on Thursday. Tin was the worst performer (down 2.0%). Copper fell by 1.6% to a two-week low. Gold futures lifted with the Comex gold price up by US$3.90 or 0.3% to US$1,229.40 per ounce. The iron ore price fell by US50c to US$131.00 a tonne.

Ahead: In Australia, new home sales figures are released. In the US, non-farm payrolls and wholesale inventories data are released.

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