COMMSEC MORNING REPORT
(7am AEST)

US same store sales rose by 6.5pct in June - well ahead of expectations for a 4.9pct rise. Of the 23 chain stores tracked by Thomson Reuters all but four of the chains reported an increase. The ICSC expects sales to rise by 4.5-5.5pct in July.

The US ADP employment report showed that private sector employment rose by 157,000 in June after a modest 36,000 increase in May. Small businesses with less than 50 employees accounted for the bulk of the job gains. As a result analysts have now upgraded the non-farm payrolls forecasts to between 125,000-175,000. In addition the weekly jobless claims numbers fell by 14,000 to 418,000 last week.

European shares rose to a five-week high on Thursday as the upbeat US economic data supported investor sentiment. In a widely anticipated move the Bank of England kept interest rates on hold at 0.5pct while the European Central Bank raised rates by 25bps to 1.5pct. The FTSEurofirst index rose by 0.5pct with the German Dax up 0.5pct and the UK FTSE higher by 0.9pct.

US sharemarkets rallied on Thursday following the improved labour market data and strong retail sales figures. The S&P retail index rallied to all time highs gaining 2.4pct. The materials sector also received a boost from firmer commodity prices rising 1.5pct. The Dow Jones index rose by 93pts or 0.7pct with the S&P 500 up 1.1pct and the Nasdaq rose by 39pts or 1.4pct.

US treasuries fell on Thursday (yields higher) as the stronger ADP employment supported risk appetite. US 2yr yields rose 4pts to 0.47pct and US 10yr yields rose 3pts to 3.14pct.

The Euro rallied against the US dollar on Thursday after the ECB president Trichet said the central bank would relax rules and continue to provide liquidity to Portugal. The Euro rose from lows near US$1.4225 to US$1.4375, ending US trade near US$1.4350. The Aussie dollar rose from lows near US107.20c to US107.80c, ending US trade near US107.70c. And the Japanese yen eased from 80.90 yen per US dollar to JPY81.40, ending US trade around JPY81.20.

Benchmark crude oil prices rallied on Thursday as the upbeat US economic data raised hopes that the US recovery remained on track. US Nymex crude oil rose by US$2.02 or 2.1pct to US$98.67 a barrel and London Brent crude rose by US$4.97 to US$118.59 a barrel.

Base metal prices recorded healthy gains on the London Metal Exchange on Thursday. Copper surged to within 5pct of its all-time high, closing up 2.3pct. And the Gold price rose again, in line with other commodities. Comex gold rose by US$1.40 an ounce or 0.1pct to US$1,530.60.

Ahead: In Australia, no economic data is released. In the US, the wholesale inventories, non-farm payrolls and consumer credit are slated for release.

Craig James
CommSec Chief Economist