Australian Stock Market Report - Morning - 12/01/2011

MORNING REPORT (7.30am AEDT) The world´s major central banks acted jointly on Wednesday to provide cheaper US dollar liquidity to European banks. The surprise emergency move included the US Federal Reserve, the European Central Bank, and the central banks of Canada, Britain, Japan and Switzerland. In a joint statement they confirmed having agreed to lower the cost of existing dollar swap lines by 50 basis points from December 5. Other measures include providing bi-lateral swap arrangements - so that any of the central banks can provide liquidity in any other currency.

China´s central bank cut the reserve requirement ratio for its commercial banks by 50 basis points for the first time in nearly three years.

The US ADP private sector employment report showed that US companies created 206,000 jobs in November - the biggest gain in nearly a year. US pending home sales jumped 10.4pct in November.

European shares rallied sharply on Wednesday as investors were buoyed by the concerted effort by central banks to support the global financial system. The FTSEurofirst index rose by 3.6pct with the UK FTSE up by 3.2pct while the German Dax was higher by 5.0pct.

US shares record robust gains on Wednesday for a third consecutive session. The rally was fuelled by an array of factors including the reserve ratio cut by China and upbeat employment data. Cyclical stocks drove the gains with the S&P material sector up 4.6pct. With an hour of trade, the Dow Jones was higher by 380pts or 3.3pct with the S&P 500 up 3.3pct and the Nasdaq was higher by 80pts or 3.2pct.

US long-dated treasuries fell on Wednesday (yields higher) as investors switched to riskier assets classes. US 2yr yields fell 1pt to 0.258pct and US 10yr yields rose by 8pts to 2.07pct.

Major currencies rallied against the greenback on Wednesday. The Euro rose from lows near US$1.3255 to around US$1.3530 and headed into the US close near US$1.3440. The Aussie dollar rose from lows around US99.40c to US103.30c, and was near US102.60c in late US trade. And the Japanese yen strengthened from JPY78.15 yen per US dollar to JPY77.30, ending US trade near JPY77.45.

US crude oil prices rallied on Wednesday as commodities received a boost on hope that the liquidity boost by central banks will support growth. However gains were capped by a larger than expected 3.9 million barrel build in US crude stockpiles. Nymex crude oil rose by US$0.57 or 0.6pct to US$100.36 a barrel and London Brent crude fell by US$0.41 to US$110.41 a barrel.

Base metal prices surged on the London Metal Exchange on Wednesday as investors bought up riskier assets, following the efforts by central banks across the globe. And the gold price recorded healthy gains on the back of the weaker US dollar. The Comex gold price rose by US$29.80 an ounce or 1.7pct to US$1,743.20.

Ahead: In Australia, retail sales and building approvals, and PMI data are released. In the US, ISM manufacturing survey and jobless claims are released.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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