Australian Stock Market Report
Friday 18, May 2012

SummaryCloseMovement% Change
All Ordinaries4208.50-6.20-0.10
All Industrials4157.40-8.10-0.20
50 Leaders4178.10-16.20-0.40

Market Turnover
 		$A 5,082,645,004.00

Commentary

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MORNING REPORT
(7am AEST)

The US leading index fell by 0.1pct in April, the first decline in seven months. Economists had tipped a gain of 0.1pct. New claims for unemployment were unchanged in the latest week at 370,000 but above forecasts near 365,000. And the Philadelphia Federal Reserve index fell to minus 5.8 in May from +8.5 in April, well below the consensus forecast of +10.0.

European shares fell to five month lows on Thursday as investors debated the potential for a euro-zone break up. Reports of a run on deposits at Spanish bank, Bankia, further hurt sentiment. The benchmark FTSEurofirst 300 index fell by 1.2pct with the German Dax and UK FTSE also lower by 1.2pct.

US sharemarkets slumped on Thursday in response to on-going euro-zone concerns as well as weaker economic data and a preference for bonds over equities. The Dow Jones fell by 156pts or 1.2pct and ended near the day´s lows. The S&P 500 fell by 1.5pct while the Nasdaq lost 60pts or 2.1pct. After the close, Facebook said its initial public offering of 421.2 million shares will be priced at US$38 a share. Facebook will list at 11am US Eastern time on Friday.

US long-dated treasuries rose again on Thursday (yields lower) as economic data disappointed and investors continued to embrace safe-haven assets on concern about a potential break-up of the euro-zone. A $13 billion auction of 10-year Treasury inflation-protected securities (TIPS) sold at a record negative yield of 0.391pct. US 2yr yields were flat at 0.298pct and US 10yr yields fell 7pts to 1.69pct. Yields on 10-year bonds aren´t far away from a 60-year low of 1.67pct.

The Euro and commodity currencies attempted rallies against the greenback in European trade but fell in line with equities in late US trade. The Euro traded between US$1.2665 and US$1.2750 before ending US trade near US$1.2690. The Aussie dollar traded between US98.80c and US99.65c and ended US trade near US98.90c. And the Japanese yen lifted sharply against the greenback in early US trade, rising from 80.38 yen per US dollar to JPY79.15 and was near JPY79.20 at the close of US trade.

Benchmark crude oil prices fell on Thursday in response to weaker-than-expected US economic data and fears of a euro-zone break up. US Nymex crude fell by US25c to US$92.56 a barrel and London Brent crude fell by US$2.26 to US$107.49 a barrel.

Base metal prices were mixed on the London Metals Exchange on Thursday. Tin and lead lost 2.4pct while zinc lost 0.1pct. But aluminium and nickel rose around 1pct. And the gold price also rebounded on Thursday in response to bargain hunting. The June Comex gold futures price rose by US$38.30 or 2.5pct to US$1,574.90 an ounce.
Ahead: In Australia no majo
r economic or corporate events are planned. In the US, no major economic data is scheduled.

Craig James
Commsec Chief Economist

This commentary is a general account of the day's trading and is not intended to be taken as a recommendation to buy, hold or sell any particular stock.