Australian Stock Market Report – Morning 12/4/13

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By Craig James, CommSec Chief Economist | December 4, 2013 10:28 AM EST

(8am AEDT)

In US economic news, chain store sales rose by 4.9% in the latest week compared with a year ago according to Redbook Research, up from 3.8% in the previous week.

European shares fell on Tuesday on investor fears that solid US data could prompt the US Federal Reserve to wind back stimulus earlier than expected. The FTSEurofirst 300 index fell by 1.5%, the German Dax slumped 1.9% and the UK FTSE lost 1.0%. In UK trade, shares in BHP Billiton fell by 1.1% while Rio Tinto lost 1.0%.

US sharemarkets were weaker on Tuesday as investors debated when the Federal Reserve will start to wind back stimulus. But technology stocks were supported by good reports of Cyber Monday sales. At the close of trade, the Dow Jones was down by 94 points or 0.6%, while the S&P 500 was down 0.3% and the Nasdaq was down 8pts or 0.2%.

US long-dated treasuries rose on Tuesday (yields lower) as investors reduced positions in equities and shifted to government bonds. The Federal Reserve bought $940 million of notes due from 2024 to 2031 and between $3 billion and $4 billion of notes due 2019 and 2020. US 2yr yields were steady at 0.289pct and US 10yr yields fell by 1pt to 2.78pct.

The US dollar eased against major currencies on Tuesday. The Euro lifted from lows near US$1.3535 to US$1.3610, and was trading near US$1.3590 in afternoon US trade. The Aussie dollar rose from lows near US90.60c to around US91.45c, and was near US91.35c in afternoon US trade. And the Japanese yen rose from 103.30 yen per US dollar to JPY102.02 and was around JPY102.37 in afternoon US trade.

World oil prices rose on Tuesday in further response to strong global manufacturing data as well as a weaker greenback. A softer US dollar makes dollar-denominated commodities less expensive for European and Asian buyers. Some debated whether a new oil pipeline would drain stocks at the Cushing, Oklahoma storage facility - the delivery point for the US crude futures contract. Brent crude rose by US$1.17 or 1.0% to US$112.66 a barrel while US Nymex crude rose by US$2.22 or 2.4% to US$96.04 a barrel.

Base metal prices fell up to 0.4% on the London Metal Exchange on Tuesday with nickel leading the way lower. The gold futures price fell slightly on Tuesday as brokers cut their price targets for the yellow metal. The Comex February futures gold price was down by US$1.10 or 0.1% to US$1,220.80 per ounce. But the iron ore price rose by $1.40 or 1.0% to a three-month high of US$138.20 a tonne.

Ahead: In Australia, the national accounts are due. In the US, the ADP employment report is released together with the ISM services index, trade data, new home sales and the Federal Reserve Beige Book. In China the HSBC services index is issued.

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