The Aussie Climbs Close to 86 Cents, but Takes a Hit From Retail Sales

The sentiment in both FX and equities in Australia was mixed today. The euphoria around the Aussie eased after the weak Retail Sales and Housing Approvals releases curtailed some of its recent gains. Similar story was seen in ASX where the opening rise was disrupted by bearish investors that did not approve the Coles supermarket takeover by the Westfarmers. The price action in the bond market was less volatile. The yield took two dips: one at the open, lead by the US market, and one after the disappointing aforementioned releases.



[B]Rio green light to Gladstone expansion[/B] - The mining giant Rio Tinto has focused on developing its alumina business by approving a $1.8 billion expansion of its Yarwun Alumina Refinery near Gladstone. The second stage expansion is expected to boost production from 1.4 million tonnes a year to 3.4, with the first shipments anticipated in 2010. The project was made possible due to a gas supply deal with Origin Energy that will provide refinery with coal steam gas. Origin has already committed to a $260 million expansion of its Walloon coal steam gas field to meet new demand. [I]Source: The Australian[/I],20867,22009170-5005200,00.html
[B]Sydney reclaims property crown[/B] - Coming back to the topic of hot Australian housing, the recent data release from RP Data and Rismar International showed that year to April housing market has shown broad recovery. Sydney was named the most expensive city with prices growth of 1.4%. Sydney?s median house now costs $515,800. The insufficient housing supply has been blamed for the price hikes; the growth of Australian population in a booming economy has outpaced the growth of real estate. As a result, the mortgage sizes are growing and jumped 5.6% year to June nationwide. The trends are expected to continue in the second half of the year. [I]Source: Herald Sun[/I],21985,22010311-5012062,00.html
[B]BHP sells S. Africa mine to black group for $72m[/B] - BHP Billiton announced that it has finalized a sale of Koornfontein coal mine in South Africa for $71.6 million to a group of black investors. The deal was part of an effort by the South African businesses to involve local majority into the mainstream economy. [I]Source: The Australian[/I],20867,22006303-5005200,00.html
The euphoria around the Aussie continued in the morning hours, the increase of gold and metal prices have helped the boost the currency. With anticipated 0.7% retail sales increase against the previous 0.1% spurred investors to pushed the Australian dollar to a high of 0.8597, mere 3 pips short of a psychological 0.8600 level. However, the retail sales disappointed with a -0.1% read that led to a sharp drop of about 30 points.

[U][B]Stock Market[/B][/U]
The rising metals and a ten month high oil price have boosted the ASX to 6320 points shortly after it opened. The Dow that closed with an impressive 0.95% gain added to the bullish momentum. The Coles and Westfarmers? stocks fell steeply though on yesterday?s news of the biggest corporate takeover in Australian history. The takeover appeared a risky venture for Westfarmers and its private partners were reported to be hesitant about it.The leaders were BHP Billiton and Rio Tinto that gained 2.4% and 2.8% respectively, aided by the oil giant Woodside that added 1.4% to its stock. The struggle ended with a 35.7 point gain at 6299.0.

[B][U]Bond Market
The US bonds that slipped lower yesterday had an impact on the Australian bonds yields, that took a modest 2 bps drop at the open. However, the weak Retail Sales and Housing Approvals , which surprised the market with -01% and -5.6% respectively, were the largest mover of the yields for the day, sending it down another 4 bps. The yield remained relatively unchanged for the rest of the day and closed at 6.140%, easing 6.3 bps.