Australian Stock Market Report – Morning November 24, 2014

A Chinese national flag flutters in front of the headquarters of the People's Bank of China, China's central bank, in central Beijing, May 16, 2014. The bank is injecting a combined 500 billion yuan ($81.35 billion) of liquidity into the country's top banks, according to media reports, a sign that authorities are stepping up efforts to shore up a faltering economy. Picture taken May 16, 2014. REUTERS/Petar Kujundzic (CHINA - Tags: BUSINESS POLITICS)

* The People's Bank of China (central bank) has cut the 12-month lending rate by 40 basis points to 5.60% and the 12-month deposit rate by 25bps to 2.75%.

* European shares rose solidly on Friday with shares in resource stocks surging in response to the first Chinese rate cut in two years. Further, the European Central Bank chief Mario Draghi said that the ECB "will do what we must" to lift inflation and inflationary expectations. The FTSEurofirst 300 index rose by 2.1% with the UK FTSE up by 1.1% and the German Dax lifted 2.6%. In London trade shares in BHP Billiton rose by 5.0% while Rio Tinto gained 6.2%.

* US sharemarkets posted solid gains on Friday with the Dow Jones and S&P 500 indexes at record highs. But restraining the gains were declines by key technology stocks with Microsoft down 1.5% and Netflix down 2.1%. The Dow Jones rose by 91 points or 0.5% with the S&P 500 index up by 0.5% and the Nasdaq lifted 11 points or 0.2%. Over the week the Dow Jones rose by 1.0%, the S&P 500 index was up by 1.2% while the Nasdaq rose by 0.5%.

* US treasuries rose on Friday (yields lower) after the European Central Bank chief highlighted the difficult European economy and flagged that more stimulus may be required. US 2 year yields fell by 1 point to 0.505% while US 10 year yields fell by 3 points to 2.31%. Over the week US 2 year yields fell by less than 1 point while US 10 year yields fell by 2.5 points.

* Major currencies were mixed against the greenback in the European and US sessions on Friday as traders dissected news from Europe and China. The Euro eased from highs near US$1.2555 to lows near US$1.2375, and was around US$1.2390 in late US trade. The Aussie dollar rose from lows near US86.00c to around US87.20c, and was near US86.65c in late US trade. The Japanese yen held between 117.38 yen per US dollar and JPY118.08 and was at JPY117.77 in late US trade.

* World oil prices rose on Friday in response to the Chinese rate cut and speculation that OPEC may reduce production quotas on Thursday. Brent crude rose by US$1.03 or 1.3% to US$80.36 a barrel while the US Nymex crude price rose by US66c or 0.9% to US$76.51 a barrel. Over the week Brent crude rose by US95c or 1.2% while US Nymex rose by US69c or 0.9%.

* Base metal prices rose by between 0.8-2.1% on the London Metal Exchange on Friday with zinc leading the gains while copper lagged. Over the week metal prices rose up to 6.7% with nickel leading the way but copper rose just 0.1%. Gold rose on Friday in response to the Chinese rate cut and short covering. Comex gold futures rose by US$6.80 an ounce or 0.6% to US$1,197.50 per ounce. Over the week gold rose by US$11.90 or 1.0%. Iron ore eased by US20c to US$69.80 a tonne on Friday and fell by US$5.70 or 8.2% over the week.

Ahead: In Australia, no major economic data is scheduled. In the US, the Markit "flash" services index is released with the National Activity index and Kansas City and Dallas Federal Reserve manufacturing indexes.

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