MORNING REPORT (6.30am AEDT)
A number of US Fed members spoke on Friday and Saturday, with timing of stimulus withdrawal being the overarching theme. Philadelphia Fed President Plosser said the Fed could cut QE by larger than $10 billion increments if data improves, floating a hypothetical amount of $25 billion. He also commented that the FOMC is still debating possible rules for taper. Fed Chairman Bernanke said that the Fed was no less committed to accommodative policy despite recent announcements to slow its stimulus program. He also said the US recovery ´´clearly remains incomplete´´.
European shares rose on Friday, recouping some of the losses suffered in the prior session. Retailers gained ground, led by Britain´s Next, which soared 10% after reporting strong Christmas sales and raising its profit forecast. The FTSEurofirst 300 index rose by 0.5% with the UK FTSE higher by 0.2% and the German Dax gained 0.4%. Mining shares were higher with BHP Billiton shares up by 0.3% in London trade while Rio Tinto was flat.
US share markets ended a volatile session mostly flat on Friday. Investors digested comments from Federal Reserve officials, which raised further questions about how quickly the central bank will end its stimulus program. General Motors fell by 3.4%, after reporting lower December sales. At the close of trade, the Dow Jones was up by 29 points or 0.2% while the S&P 500 was flat and the Nasdaq fell by 11 points or 0.3%. Over the week the Dow Jones fell by less than 0.1% while the S&P 500 and the Nasdaq both lost 0.6%.
US treasury prices fell on Friday (yields higher) after the Federal Reserve Chairman Bernanke gave an upbeat outlook on the US economy, supporting the Feds commitment to scale back asset purchases. US 2 year rose by 1 point to 0.40% while US 10 year yields rose by 1 point to 3.00%.
The US dollar rose against the major currencies on Friday following upbeat comments from Fed Chairman Bernanke. The Euro fell from highs around US$1.3765 to lows near US$1.3580 and was trading around US$1.3590 at the close of US trade. The Aussie dollar fell from highs US90.05c to lows near US89.40c, and held near US89.45c at the close of US trade. And the Japanese yen fell from highs near 104.10 yen per US dollar to lows near JPY104.85 and was near its highs this morning.
World oil prices fell on Friday, as US inventory data showed a larger-than-expected build in distillate inventories. US distillate stockpiles rose by 5 million to their highest level in two months. Brent crude fell by US$1.46 or 1.3% to US$106.89 a barrel while US Nymex crude fell by US$1.48 or 1.6% to US$93.96 a barrel.
Base metal prices fell on the London Metal Exchange on Friday, tin was the biggest decliners losing 2.6% and lead fell 2.1%. Copper eased from seven-month highs losing 1%. Gold rose on Friday. The Comex gold futures price lifted by US$24.60 or 2.0% to US$1,238.60 per ounce. The iron ore price was unchanged at US$135.00 a tonne.
Ahead: In Australia, the Performance of Services Index is released. In the US, factory orders are released.
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