The global markets saw stability, which spurred the appetite of the carry traders and has pushed the Aussie higher, firmly establishing it above the 87 cents benchmark against the US currency. The capital markets were not quite as strong: the investor confidence declined, sending the ASX index lower, while bond yields lost 5.2 basis points under the pressure from carry traders and domestic investors shying away from equities.
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[B][U]Headlines[/U][/B]
[B]Record mining deals to come[/B] - Hyperactive mining sector has produced several record breaking deals recently. Amongst them is Rio Tinto?s $38.1 takeover of Canada?s Alcan in an effort to crate world?s largest aluminum company and Brazillian steelmaker Gerdau taking over the US Chaparral for $4 billion. Analysts note that this is not the end and there are more huge deals to come. A reason for the hype is the renewed investor opinion about mining companies. Just few years ago they were regarded the dinosaurs of the old economy on the verge of being displaced by newly emerging internet and tech companies. The tech bubble burst put things into their places and the mining industry with solid assets base is in high demand again. Source: The Australian
http://www.theaustralian.news.com.au/story/0,25197,22077947-5005200,00.html
[B]Families go without food to pay rent[/B] - More than one in 20 households in Victoria ran out of food and money at least once in the past 12 months, according to the data from The McCaughey Centre. The Victorian Council of Social Service highlights real present crisis of poverty as rents, mortgages and petrol prices skyrocket with a lag in wage increase. The group urged the state government to take action by building more public housing, providing affordable transportation and limiting energy and water prices for low-income families.
Source: Herald Sun.
http://www.news.com.au/heraldsun/story/0,21985,22081614-5012062,00.html
[B]Oil price flirts with record[/B] - The crude oil futures neared all-time records, light sweet crude for delivery in August climbing to $73.93. The speculative buying was spurred by tight US fuel supplies and the news that International Energy Agency (IEA) has increased its estimate for the 2008 global oil demand by 2.5% to 88.2 million barrels a day. Analysts also took notice that some of the recent price hikes followed the closure of a number of North Sea oilfield for maintenance and pipeline problems, tightening the supply. Source: The Australian.
http://www.theaustralian.news.com.au/story/0,25197,22077949-5005200,00.html
[U][B]Currency[/B][/U]
The Aussie remained strong and with an empty economic calendar saw steady increase on New Zealand?s higher than forecasted inflation that printed 1.0% versus 0.8% predicted for the second quarter of 2007. The Australian currency remains bullish and trades in a narrow channel with very little volatility for over two days now. The Aussie reached an 18-year high against the US dollar and a 17-year high against the yen. While this growth cannot continue forever, the analysts expect that the Aussie will find support at the 87 cents level. They also bring into attention that the US industrial production and national home building to be released tomorrow will have a major impact on the Australian currency, boosted last week by the US housing market worries.
[U][B]Stock Market[/B][/U]
The ASX dipped today on conservative investor sentiment. The ASX saw small gains after the open on the positive lead from the Dow that managed to squeeze another 45.5 points, closing at record 13,907.25. However, the investors were concerned that Rio Tinto?s bid for Alcan will increase its debt, hence a slide of 4.3%. The earnings growth of another mining giant BHP Billiton was regarded not catching up with its stock gains and the market took a decision to adjust its share price by 2.5%. The telecommunications giant Tesla Corporation closed the lead with a relatively modest 1.0% slide. The index closed mere 8.6 points lower at 6380.8.
[U][B]Bond Market
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The bond yield opened lower after the US yield lead, maintaining its correlation with the global markets. The declining equities and pressure from carry traders have resulted in the yield slipping even lower throughout the day. News headlines about families starving due to high housing and energy prices might have contributed as well, as the investors fear government intervention. The yield lost 5.2 basis points today, closing at 6.18%.
