The Australian dollar and bonds rose appreciably today, while the equities have not been moving much on the mixed news and ended the day with a modest loss. The Aussie has surged to as high as 0.8554 as the carry traders continued to buy the unit. Bond yields went down in response.
[B]Resources boom to rescue rust belt[/B] - The current mining boom in Australia is being compared to a pivotal moment in the country?s history 160 years ago when major copper resources have been discovered in the South. Industry leaders, such as BHP Billiton are playing a key role in the expansion. Their mines near Roxby, which are believed to be the world?s second biggest base metals deposits ever, are projected to increase city?s population from 4100 inhabitants to about 10,000 by 2015. Mining, which now accounts for only 2% of the Australian GDP is projected to grow to 10% in the next 10 years. [I]Source: The Australian[/I]
[B]Wind and hot rock companies pick up steam[/B] - The energy sector is generally very sensitive to the political mood on climate change. As the federal Government committed to carbon trading starting in 2012 the winners in the energy sectors have changed. The traditional coal-powered plants will become less profitable when the CO2 emissions will impose hefty costs and their more environmentally friendly rivals shall profit more. Companies in the gas, wind and thermal energy have seen unprecedented levels of growth recently, with a gas giant Queensland Gas Company doubling in value in the past two months, a geothermal energy pioneer Geodynamics Limited doubled in the past month. These small companies are not a threat to the current dominating players such as BHP, which have deep pockets to buy them out. The development of such technologies is viewed as progressive and positive for the Australian economy. [I]Source: The Australian[/I]
[B]Wesfarmers agrees terms for Coles bid[/B] - Westfarmers is expected to reach an agreement with a retail giant Coles for a $20 billion takeover. The driver of the bid is the recent improved outlook for the coal operations of the mining giant and hence the company?s opportunity to invest new capital. While Westrafmers? private equity partners are hampered by the high cost of its debt, its equity has become cheaper. The international search for a new CEO has already been launched. [I]Source: Herald Sun[/I].
The Australian dollar continued a steep climb up to new high today without any strong fundamental support. The session opened with what was rumored as a large buy order from US that boosted the Aussie 50 pips in a mere half hour. After the market corrected a little, the climb continued and the Aussie reached as high as 0.8554, highest since February 1989. Record high oil prices and the rising gold and metal prices have helped as well.
The Australian stock index has been pulled both up and down today. The rising commodities made mining giants look good and boosted the early morning trade. However, the bad news from the Wall St. was putting selling pressure. As a result, the index stayed in a tight range from 6293.1 to 6184.2 and closed with a modest loss of 11.6 index points at 6263.3. The market movers were banks: Commonwealth Bank of Australia, National Australia Bank Limited and Australia and New Zealand Banking Group, each losing roughly 1.0%.
[/B][/U]Strong buying by carry traders as well as a huge fall of the US yields have sent the Australian yields the same way. It dropped about 6 basis points at the open and traded with a very tight +/- 1 basis point range throughout the day, ending 5.3 basis points lower at 6.203%.