Australian Stock Market Report - Morning - 12/16/2011


(8.00am AEDT)

The Empire manufacturing survey bounced to a 7-month high of 9.53 in December. The Philly Fed survey bounced to an 8-month high of 10.3 in December. Both suggest that the US economy is weathering the ongoing European crisis relatively well. US producer prices rose 0.3pct in November after falling by a similar magnitude in October. Excluding food and energy producer prices was up just 0.1pct in November.

The US current account deficit narrowed from $124.7 billion to $110.3 billion in the September quarter. In terms of investment flows there was a huge swing in foreigners' net transactions in US Treasuries, with a total of $123.8 billion of inflows as the European debt crisis intensified. Interestingly TIC data also revealed that net foreign purchases of US securities was just $4.8 billion in October. US jobless claims fell by 19,000 to 366,000 in the last week - 3½ year low.

European shares rose in thin volume on Thursday after a Spanish bond auction produced good demand. Spanish Treasury sold €2.5 billion of 5yr bonds at a yield of 4.02pct compared with 5.28pct on the December 1. Oversold technical indicators also supported the modest rally. The FTSEurofirst index rose 1while the UK FTSE rose 0.6pct and the German Dax rose 1.0pct.

US shares recorded healthy gains on Thursday following the upbeat US manufacturing and employment data. However a warning from the head of the IMF that the world economic outlook was ´´quite gloomy´´ and will require action by all countries to head of a global recession capped gains. At the close of trade, the Dow Jones was up 47 points or 0.4pct. The S&P 500 rose 0.3pct, and the Nasdaq was higher by 4 points or 0.3pct.

US long-dated treasuries were little changed on Thursday. The employment and manufacturing data suggested that the US economy was gathering momentum however this was offset against the European debt backdrop. US 2yr yields were flat at 0.24pct and US 10yr yields were flat 1.91pct.

The Euro recorded a modest rebound against the greenback in overnight trade. The Euro rose from lows near US$1.2965 to around US$1.3045 and was near US$1.3010 in late US trade. The Aussie dollar rose from lows around US98.60c to US99.85c, and was near US99.10c in late US trade. And the Japanese yen held between 77.70 yen per US dollar and JPY78.10, and was near JPY77.90 in late US trade.

World crude oil prices continued its recent slide on Thursday in a volatile trading session. As concerns about the slowdown in Europe overshadowed the upbeat US economic data. Nymex crude oil fell by US$1.08 to US$93.87 a barrel and London Brent crude fell US7c to US$105.09 a barrel.

Base metal prices were mostly stronger on the London Metals Exchange on Thursday. Metals rose between 0.1-.2.9pct with the exception of Lead and Zinc. Similarly the gold price fell for a third straight session following the lower oil price. Comex February gold price lost S$9.70 an ounce or 0.6pct to US$1,577.20.

Ahead: In Australia, no economic data is release. In the US, consumer price data is 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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