Australian Stock Market Report – Morning January 6, 2015

Stock market indices — A pedestrian holding her mobile phone looks at an electronic board showing graphs of various countries' stock market indices outside a brokerage in Tokyo July 22, 2014. Reuters

* In US economic data, the New York ISM index rose from 663.4 to 673.8 in December.

* European shares slumped on Monday on worries about the future of Greece within the euro zone. A report in the German newspaper, Der Spiegel, suggested that German officials believe the euro currency bloc would cope should Greece decide to exit. There were also worries about possible deflation in Europe. The FTSEurofirst 300 index fell by 2.3% with the German Dax down by 3.0% and the UK FTSE down by 2.0%. The biggest declines occurred in southern Europe with the Italian sharemarket down by 4.9%, Spanish market lower by 3.5% and Greek market down 5.6%. In London trade shares in BHP Billiton lost 4.5% while Rio Tinto fell by 2.9%.

* US sharemarkets followed European bourses lower on political and economic uncertainties in Europe. The energy sector was amongst the hardest hit with the oil price slumping to fresh 5-1/2 year lows. At the close of trade the Dow Jones was lower by 331 points or 1.9%, the S&P 500 index was down by 1.8% and the Nasdaq was down by 74 points or 1.6%.

* US longer-term treasuries rose sharply on Monday (yields lower) as investors flocked to safe-haven assets like government bonds and gold. Investors also await the release on Wednesday of minutes of the last Federal Reserve meeting. US 2 year yields fell by 1 point to 0.669% while US 10 year yields fell by 8pts to 2.037%.

* Major currencies were mixed against the greenback in European and US trade on Monday. The Euro fell from highs near US$1.1975 to lows near US$1.1890, and was around US$1.1940 in afternoon

US trade. The Aussie dollar rose from lows near US80.35c to highs around US81.05c and was trading near US80.85c in afternoon US trade. And the Japanese yen lifted from 120.60 yen per US dollar to JPY119.40 before settling near JPY119.62 in afternoon US trade.

* World oil prices fell on Monday on fears of weaker demand emanating from the political jitters in Europe. And supply continues to rise with data showing that Russia's oil output hit a post-Soviet high last year, and Iraq's oil exports in December were the highest since 1980. Brent crude fell by US$3.31 or 5.9% to US$53.11 a barrel while the US Nymex crude price fell by US$2.65 or 5.0% to US$50.04 a barrel

* Base metal prices fell by up to 1.7% on the London Metal Exchange on Monday with copper leading the declines. But nickel bucked the trend, up by 2.5%. Gold rose on Monday as investors embraced safe-haven assets. The Comex gold futures price was up by US$17.80 an ounce or 1.5% to US$1,204.00 per ounce. Iron orefell by US40c to US$70.80 a tonne on Monday.

Ahead: In Australia, weekly consumer confidence data is released with international trade figures. In China, the HSBC services index is released. In the US, the ISM services index is released together with factory orders.

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