Australian Stock Market Report – Morning 1/22/14

US MORNING REPORT
(8am AEDT)

European shares rallied to a fresh 5½-year high on Tuesday. Better than expected earnings from consumer goods maker Unilever (up 1.8%) supported investor sentiment. Sales rose 8.4% in emerging economies and accounts for more than half of earnings. In addition solid German sentiment data remained near 8 year highs. The monthly ZEW survey of economic sentiment slipped from 62.0 to 61.7 in December. Economists now expect Germany´s growth expansion of around 1.7% in 2014 after 0.4% in 2013. The FTSEurofirst 300 index rose by 0.1% with the UK FTSE up by 0.2% and the German Dax gained 0.3%. Mining shares were weaker in London trade with BHP Billiton shares down 1.7% while Rio Tinto fell by 3.1%.

US share markets were mixed on Tuesday as strength in material stocks was offset by a round of disappointing earnings. The S&P materials index rose 0.6% and was the best performing sector led by Dow Chemical (up 6.7%) after speculation of a potential spinoff of its petrochemical arm. Alcoa also lifted by 7% after broker upgrades. Johnson and Johnson (down 1.2%), Verizon Communications (down 1.5%) and Travelers Cos (down 1.7%) reported weaker results, limiting gains. At the close of trade left, the Dow Jones was down by 44 points or 0.3%, while the S&P 500 rose by 0.3% and the Nasdaq gained 0.7%.

US treasury prices were mixed on Tuesday, as traders focused on the upcoming Fed meeting and further tapering. US 2 year yields fell 1 point to 0.38% while US 10 year yields were flat at 2.82%.

The US dollar was mixed against major currencies on Tuesday as traders started to focus on the next week´s upcoming FOMC meeting. The Euro touched early lows near US$1.3520 before lifting to highs near US$1.3560 and was trading around US$1.3560 in late US trade. The Aussie dollar fell from highs near US88.25c to lows near US87.75c, and held near US88.10c in late US trade. And the Japanese yen traded between 104.75 yen per US dollar and JPY104.05 and was trading near 104.30 in late trade.

World oil prices were higher on Tuesday as upbeat IMF global growth forecasts support oil demand expectations. News that Libya´s oil minister had resigned also added to price gains. Brent crude rose by US41c or 0.4% to US$106.76 a barrel while US Nymex crude rose by US62c or 0.7% to US$94.99 a barrel.

Base metal prices were higher on the London Metal exchange on Tuesday, with the exception of Tin (down 0.7%) and Aluminium (down 0.5%). Copper lifted by 0.6% on concerns of near-term tight supply. LME inventories continue to fall and a port strike in Chile exacerbated a temporary shortage of the metal. And the gold price fell from five week highs. Comex gold futures lost US$10.10 or 0.8% to US$1,241.80 per ounce. The iron ore price fell by US$1.60 to US$123.20 a tonne.

Ahead: In Australia, the consumer price index for the December quarter is released. In the US, no economic data is expected.

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