HERE'S OVERNIGHT MARKET UPDATE• US bond yields were higher...

HERE'S OVERNIGHT MARKET UPDATE
• US bond yields were higher following an unexpected drop in US initial jobless claims and after the US Treasury announced that it will sell US$74bn of notes and bonds next week. The 2-year yield increased 2bps to 0.734% and the 10-year yield rose 7bps to 3.382%, its highest level in close to two weeks.
• Australian bond futures underperformed US Treasuries at the long end. The implied yield on 3-year bond futures was up 4bps to 4.780% (price down 4bps to 95.220) and the implied yield on the 10-year bond futures was up 5bps to 5.415% (price down 5bps to 94.585).
• US equities were alternating between gains and losses for most of the day as the markets grew following the news that Bank of America Corp will repay US$45bn of bailout funds and a better-than-expected US initial jobless claims reading. The markets later pared earlier gains on the back of weaker US services industries data. At the time of writing, the DJIA and the S&P500 remained unchanged at 10448 and 1109 respectively and the Nasdaq rose 0.4% to 2193.
• European equities closed slightly lower after an unexpected drop in US services industries. Weaker metal prices drove raw-material producers lower which overshadowed an initial rally in bank shares. The DJ Euro Stoxx 50 slipped 0.1% to 2876, the FTSE100 fell 0.3% to 5313 and the German DAX dipped 0.2% to 5770.
• The Australian SPI 200 Dec 09 futures contract was down 12 points or 0.3% to 4776.
• The USD traded stronger against major trading currencies. EUR/USD opens at 1.5094 driven higher by comments of the ECB president that the need for stimulus measures has diminished. GBP/USD opens weaker at 1.6566 after trading sharply downwards. USD/JPY gained overnight to open at 88.25 after reaching a high of 88.48.
• It was a mixed session for the AUD. AUD/USD has dropped to 0.9282 after a choppy session and AUD/EUR opens lower at 0.6149. AUD/JPY trades higher 81.90 after a strong rally overnight. AUD/NZD weakened to 1.2795 after erasing earlier gains.
• Crude oil decreased following a stronger USD. WTI futures contract for January fell 0.1% to US$76.50 a barrel.
• Spot gold reported a new record high of US$1,226.56 an ounce overnight before paring some of those gains. Spot gold increased 0.2% to US$1,218.00 an ounce.
• LME copper December futures dropped 0.6% to US$7,080 a tonne from a 14-month high as an unexpected decline in US services industries spurred on doubts about the strength of the economic recovery. Other base metals futures decreased, with aluminium, nickel, zinc and lead ending 1.1%, 1.8%, 0.8% and 3.0% lower respectively.
• US soybeans increased 1.3% on the back of higher demand for US oilseed and animal feed. Corn fell 1.4% on expectations that the USD will rebound and wheat dropped 0.9% after Canada, the world’s second largest exporter, announced a larger-than-expected harvest. Sugar increased 0.3% and palm oil futures fell 0.3%.
Please also note that the prices / rates have been updated at 0645 AEST.