Australian markets saw negative initial pressure on both Aussie against the US dollar and ASX. Falling gold prices and a drop in US equities were much to blame. However, the Aussie and ASX both regained their stance under the bullish pressure prevailing over the past couple of days. Bond yields also rallied, ending the day 6 basis points higher.
[B]Investors rush into super[/B] - Super funds are streamlining a ton of cash into Australian equity to receive tax-free benefits, the deadline for which comes into effect in jut nine days. Such seasonal move is not unusual, but the unprecedented volumes of cash that landed on the ASX yesterday was a surprise even to the veteran brokers. It is believed that this bubble was eventually responsible for reverting yesterday?s initial fall of the exchange and pushing it to its highs. As the magic date of June 30th draws closer, many fund managers are tidying up their fiscal year that will result in strong market moves over the next two weeks. Source: The Australian.
[B]Rising costs close Wiluna goldmine before $30m sale[/B] - Oxiana shut down the Wiluna gold mine in central Western Australia facing steeply rising costs. The move was expected as the mine was small and with short life of only three years, and so it happened finally. The mine was sold to Apex for $29.5 and the new owner plans to make use of Wiluna?s processing plant as a production hub for its higher grade mines in the region. The shutdown cost is estimated to be between $1 and $2 million. Source: The Australian.
[B]Men most guilty of debt default[/B] - Australian are defaulting on small debts more frequently. A credit card check company Dun and Bradstreet revealed its data with statistics on Australian use of credit. The male population is more likely to default than female, and the average age of a defaulting client is falling. This statistic will make loans less accessible for younger people who need money to purchase their first car or house, reshaping the Australian consumer spending habits. Source: Herald Sun
The Reserve Bank of Australia?s Foreign Exchange transaction figures were the only data for the night, printing A$480M versus A$354M prior. This figure did not move the market as it simply stated the now obvious fact that carry traders are rushing into the land of kangaroos to take advantage of its competitive bond yields. The initial dip was caused by the falling gold prices, the country?s third largest export commodity and strong US yields. However, Aussie recovered its position later in the day as the rising domestic yields kept attracting international investors and made Aussie stronger. Furthermore, yesterday?s good news were probably still on the minds of investors allowing for such quick regain of positions, and Aussie saw a rise to 0.8460.
ASX followed the Dow?s lead and dropped sharply right after it opened, but Australian investors did not mimic Wall Street today. Despite the flow of bad news: oil and gold prices dipping and bonds gaining, the index jumped from 6360 to about 6390, trading close to that figure with no major moves. It eventually closed at 6387, a mere 9.9 points below yesterday?s finish. Coles Group Ltd. was the leader of morning?s fall, as TPG Inc. quit plans to bid for it in a buyout. The retailer slipped 2.37% by noon. BHP Billiton, however, seems to be fixing its current unrest in the top management and gained 0.6% by noon. Just like Aussie dollar, ASX refused to bow to the downwards pressure and appears to be on its way up again.
Following the rise of the US yields, Australian bonds bounced up considerably right at the open and then rose throughout the day. This move was driven in part by competition with domestic corporate bonds, as Macquarie Leasing sold A$1 billion ($844 milling) worth of bonds today backed by revenue from its auto and equipment hire leases. The demand for such competitive yields drove the price down and the 10-yr yield closed at 6.263, gaining 6 basis points.