Australian Stock Market Report – Morning 12/17/13

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By Craig James, CommSec Chief Economist | December 17, 2013 10:24 AM EST

(8am AEDT)

In US economic news, industrial production rose by 1.1% in November ahead of market forecasts centred on a 0.5% gain. The Markit ´´flash´´ manufacturing gauge eased from 54.7 to 54.4 in December, short of the 55.0 forecast. The Empire State manufacturing index lifted from minus 2.21 to +0.98 in December, but this was short of the +4.75 forecast. And overall net capital inflows to the US totalled US$194.9 billion in October compared with outflows of US$106.8 billion in September.

In European economic news, the ´´flash´´ German purchasing managers' index for December was 54.2, up from 52.7 in November and above forecasts near 53.0.

European shares rose on Monday, with investors encouraged by solid economic data in the US and Germany. The FTSEurofirst 300 index rose by 1.3% with the UK FTSE up 1.3% and German Dax up 1.7%. Mining shares rose with BHP Billiton shares up 2.0% in London trade while Rio Tinto lifted 1.2%.

US sharemarkets rose solidly on Monday. Investors were encouraged by the latest economic data but remain focused on this week´s Federal Reserve decision. And merger & acquisition news buoyed investor sentiment. At the close, the Dow Jones was up by 129 points or 0.8%, with the S&P 500 up by 0.6% while the Nasdaq rose by 28 points or 0.7%.

US treasuries were little changed on Monday. On balance, US economic data was encouraging but traders remained focused on Wednesday´s Federal Reserve decision. US 2 year yields were steady at 0.33% while US 10 year yields rose by less than 1 point to 2.879%.

The Euro and commodity currencies lifted from lows against the US dollar in European and US trade on Monday. The Euro rose from lows near US$1.3740 to around US$1.3795 before slipping again and was trading around US$1.3765 in afternoon US trade. The Aussie dollar rose from lows near US89.25c to around US89.70c, and was near US89.45c in afternoon US trade. And the Japanese yen eased from 102.68 yen per US dollar to JPY103.14 and was near JPY103.00 in afternoon US trade.

World oil prices rose on Monday in response to the continued closure of Libyan oil ports and a lift in the German manufacturing sector. Brent crude rose by US$1.64 or 1.5% to US$110.47 a barrel while US Nymex crude rose by US88c or 0.9% to US$97.48 a barrel.

Base metal prices were mixed on the London Metal Exchange on Monday. Aluminium fell 0.4% while nickel fell 0.5% but other metals rose up to 0.6% with copper leading the way. Gold rose on Monday on continued safe-haven buying with the Comex gold futures price up by US$9.80 or 0.8% to US$1,244.40 per ounce. The iron ore price fell by $1.10 on Monday to US$134.90 a tonne.

Ahead: In Australia, the Mid Year Economic & Fiscal Outlook Report is released. Also Reserve Bank Board minutes, car sales, and population figures are issued. In the US, the Federal Reserve begins a two-day policy meeting. The consumer price index and current account data are issued.

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