The picture in Australian markets changed drastically as compared to yesterday. The ASX dropped 0.8% shortly after it opened, closing at 6,180.7, and the Aussie dipped 50 pips to .8390 before regaining a little. The economic news are almost universally bad: Westpac consumer confidence printed -2%, the metals dropped dragging down the mining giants,a major investment bank recommended shorting Aussie against the yen.
Dollar drops on US worries - The 129.95 point drop of the Dow, and a five year high of 5.30% the US 10-yr bond had significant impact on Australian dollar. It traded between a low of 08390 and high of 0.8427. Australian investors turn their attention to the Reserve Bank governor Glenn Stevens for the guidance this week. Source: Herald Sun.
Miners drag down share market - at noon AEST the ASX200 index dropped 39.6 points lower to 6200.5. The major miners were the drivers of the drop, as the metal prices fell overnight, copper and nickel suffering largest losses. The fall of US stocks has contributed, with Dow Jones falling almost a percent to 13,295.01. Source: Herald Sun.
Carbon trade will be huge - Dr. Ziggy Switkowski of the Australian Nuclear Science and Technology organization estimated that the market for trading CO2 emissions priced between $20 and $50 a tonne would total to $4-$9 billion. Australian financiers are in a position to benefit handsomely from such market. Dr. Sitkowski also notes that the potentially high prices of CO2 emission will make installation of a nuclear power plant on the eastern seaboard of Australia inevitable, the nuclear power being the only feasible alternative to carbon fuel that is dominating now. Source: The Australian
More miners list on Middle East exchange - Michael Kiernan of Monarch Gold Mining envisions that within five years the Dubai exchange (DIFX) will be an influential financial market and an excellent gateway for attracting Middle Eastern and African investors. Source: The Australian
The Australian Dollar took a significant dive late Tuesday night AEST from 0.8442 down to .8389. The price action was purely driven by domestic and US bond yields, ignoring other market signals. In fact, the Westpac Consumer confidence that printed -2.0% versus previous 7.5% at 8:30 PM EST did not send Aussie lower. On the contrary, it started to rise at that point and bounced up to .8425. After another drop, it was trading between .8403 and .8417, suggesting that for the time being the market has found new equilibrium. A major investment bank reversed its previous recommendation regarding the Aussie and recommended shorting it against the yen with price target of 101 by the year?s end. With the house prices anticipated not to climb very high, metals dropping and RBA contemplating putting breaks on growth figures, the Aussie might be heading down a bumpy road in the long run.
Today?s story of the ASX was completely the opposite of yesterday?s. It dropped 50.20 points or 0.8% to 6189.9 driven by global markets decline and bond yields surge. The largest losers were ANZ, Australia?s third largest bank that lost 0.8%, Woolworths, nation?s biggest retailer, (-1%), Telstra Corp., biggest telephone company, (-1.3%) and Macquiarie, largest investment bank, (-1.2%). The overnight drop of metal prices caused big miners to lose as well, BHP Billiton losing 1.1% of its value.
The 10-yr yield gained 1.3% rising from yesterday?s close of 6.232% to the max 6.318% shortly after the open with minor deviations from that amount during the day. The yield has certainly responded to the similar huge rise of the US bond yields. Is there more space for growth?