The Australian markets were driven by the global yield surge as two largest European central banks: BOE and ECB released their rate decisions and outlooks for the near future. BOE hiked 25 bps and the ECB rate left unchanged. The US dollar that got strengthened by strong labor market pulled the AUDUSD pair lower. The ASX closed marginally lower and the 10-yr yield rose.
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[U][B]Headlines[/B][/U]
Gindalbie backs Yilgarn infrastructure plan - A plan of an exploration and mining company Yilgarn to build port and rail facilities in Western Australia?s Midwest was supported by an iron ore giant Gindalbie Metals. Gindalbie?s managing director Garret Dixon said it was important for the company to boost its strategic planning for its expected infrastructure requirements. Another iron ore miner Midwest Corp. joined Yilgarn in the initiative. This event signals Australian mining industry?s push to solve the current transportation bottleneck as quickly as possible to unleash the mining boom?s potential to the fullest.
http://www.news.com.au/heraldsun/story/0,21985,22028092-5012062,00.html
Newmont winds down entire gold hedging position - The Newmont Mining Corporation has eliminated its gold hedge to realize value of the growth of its core business. The eradicate 1.85 million ounce hedge position made Newmont the largest unhedged gold producer in the world. Company spokesman said that the sell out ended up costing the company $531 million in pre-tax loss. Newmont?s executive Richard O?Brien stated that the company is focused on improving its performance and cost structure.
http://www.theaustralian.news.com.au/story/0,20867,22028138-5005200,00.html
Surging dollar hits Iluka despite discovery - Despite a successful discovery at its Eucla Basin, the earnings prospects do not appear that great for the mineral sands miner Iluka. As analysts continue to forecast rise of the Australian currency, Iluka had to downsize its earnings forecast for 2008. Current high zircon contract price ($780 a tonne) gives rise to speculations that it might retreat to $500 level. Macquarie Equities stated that in the short term outlook for Iluka remains unappealing.
http://www.theaustralian.news.com.au/story/0,20867,22024980-5005200,00.html
[U][B]Currency[/B][/U]
With the lack of major economic releases, the AUDUSD pair was dominated by the strong US data that strengthened the US currency across the board and pulled the pair from the near .8600 highs. The AIG Perf. of Construction index that printed strong 51.3 against previous 45.1 gave Aussie a boost and it has recovered its position gradually for the rest of the day with pull backs observed due to the remaining strong USD. The pair is expected to be driven by the US releases for until the end of the week.
[U][B]Stock Market[/B][/U]
Today the ASX declined as the Australian banks felt pressure from the rising bond yields. National Australia Bank was leading the drop, slipping %. The base metals were up though, pulling the miners shares: BHP Billiton gained %. In the fight of booming mining versus declining banking as it played out today, the latter won by a small margin and the index eased 11.2 points to 6351.1.
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Bond Market
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Bond market was almost purely driven by the global yields. After the announcements from European and UK central banks, the yields went up in both Europe and the US. The Australian 10-yr yield followed, putting downwards pressure on domestic banks and the equities.
