The Australian sharemarket will likely see a choppy start to trading. Despite a late sell off on the US sharemarkets, the surge in oil, gold and base metals prices should be positive for our resources sector. The Aussie sharemarket may be down 10-20 points at the start of trade.
The US economy grew at a 2.6 per cent annual pace in the December quarter, down from 5 per cent in the September quarter and below forecasts centred on 3 per cent growth. The employment cost index rose by 0.6 per cent in the December quarter, in line with forecasts. Consumer sentiment eased from 98.2 to 98.1 in January.
In Chinese economic data, the manufacturing purchasing managers index eased from 50.1 to 49.8 in January. The services PMI eased from 54.1 to a 12-month low of 53.7 in January.
European shares fell on Friday on concerns about negotiations between the Greek Government and its lenders. The FTSEurofirst index fell by 0.6 per cent but still lifted 7.1 per cent in the month -- the best gain in over three years. The German Dax lost 0.4 per cent on Friday with the UK FTSE down by 0.9 per cent. Mining shares rose in London in response to higher metal prices with BHP Billiton up by 2.1 per cent while Rio Tinto lifted by 1.4 per cent.
US sharemarkets sold off in late trade after the new Greek government said it wouldn't co-operate with an EU and International Monetary Fund mission to the country. The Dow Jones fell by 252 points or 1.5 per cent, the S&P 500 index fell by 1.3 per cent and the Nasdaq lost 48 points or 1.0 per cent. Over the week the Dow and S&P both lost 2.8 per cent while the Nasdaq fell by 2.6 per cent.
US long-term treasury prices were firmer (yields lower) on Friday after economic data suggested that the Federal Reserve could delay lifting interest rates this year. US two-year yields fell by 7 points to 0.45 per cent while US 10-year yields were down by 12 points to 1.64 per cent. Over the week US two-year yields fell by 7 points and US 10 year yields fell by 19 points.
Major currencies drifted against the greenback in European and US trade on Friday. The Euro traded between $US1.1275 and $US1.1360 and was near $US1.1285 at the US close. The Aussie dollar held between US77.30c and US78.00c and was near US77.65c at the US close. The Aussie is near US77.30c this morning. And the Japanese yen held between 117.29 yen per US dollar and ¥117.92 and was at ¥117.44 at the US close.
World oil prices rose on Friday after data showed the biggest weekly fall in US oil rig counts since 1987. The Brent crude price rose by $US3.86 or 7.9 per cent to $US52.99 a barrel while the US Nymex crude price rose by $US3.71 or 8.3 per cent to $US48.24 a barrel.
Base metal prices rose by up to 2.5 per cent on Friday with aluminium leading the gains. But tin fell by 0.8 per cent and lead lost 0.1 per cent. Over the week nickel soared 5.7 per cent with aluminium and zinc up 1.7 per cent. Gold soared as oil rebounded with the Comex gold futures price up by $US23.90 an ounce or 1.9 per cent to $US1,278.50 per ounce. But gold lost $US14.10 or 1.1 per cent over the week. Iron ore fell by US60c or 1.0 per cent on Friday to $US61.70 a tonne. Over the week, iron ore lost $US4.20 or 6.8 per cent.
Ahead: In Australia, the Performance of Manufacturing index is released together with the Home Value index and the monthly inflation gauge. In the US, the ISM manufacturing index is released.
Craig James is chief economist with CommSec.