Posts Tagged ‘United States’

PFG – Mining Review




May 07, 2012                                            

Christian Flaherty
Mining Analyst

Xstrata Plc., has stated its copper production fell around 18% year on year over the January-April quarter, while coal production rose 9% and zinc output remained roughly constant.

Russia’s largest gold producer Polyus Gold International Ltd., has stated it would sell 7.5% of  the  company’s shares and would apply for a premium listing on the London Stock Exchange.

Iron-ore producer Metalloinvest has agreed to sell its freight rail arm LLC Metalloinvesttrans to Russian freight operator Globaltrans Investment Plc., for US$540 million.

Hong Kong-based copper producer CST Mining Group Ltd. said it would sell a 70% stake in the Mina Justa copper project to Peru-based base-metals firm Minsur SA, for a total US$505 million.

Anglo American Plc., has sold Scaw South Africa (Pty) Ltd., an integrated steelmaker, for R3.4 completing its US$1.4 billion divestment of Scaw Metals Group.

Rare Earth Elements (REE) product manufacturer Rhodia has signed a letter of intent with Madagascar focused developer Tantalus Rare Earths AG aimed at providing processing expertise and an exclusive off-take facility for up to 15,000t/y.

Mongolia’s mining ministry has suspended mining and exploration licenses for SouthGobi Resources Ltd., two weeks after the Aluminum Corporation of China Ltd., made a US$930 million bid for a majority stake in the coal producer.

Rio Tinto has stated its iron-ore production in the first quarter rose 10% from the year earlier, although shipments were 5Mt below output as ports in Western Australia were closed because of cyclones.

Gold exploration company Chaarat Gold Holdings Ltd., has stated it plans to enter into talks with the newly formed government in the Kyrgyz republic to seek to protect itself from what it considers to be likely changes to taxation, ownership structure and royalties.

Canadian gold producer Iamgold Corp., has stated it would spend around $608 million to buy fellow TSX listed Trelawney Mining and Exploration Inc., expanding its indicated resource base by 5%.

Mutiny Gold Ltd., has intersected extensions to mineralisation at its Deflector gold deposit in Western Australia with reverse-circulation drilling.

Ivanhoe Mines Ltd’s 59%-owned Australian subsidiary, Ivanhoe Australia Ltd., has intersected extensions to copper mineralisation at the Kulthor deposit in Queensland.

Lake Shore Gold Corp’s ongoing drilling programme at the Fenn-Gib gold project in Ontario has extended mineralisation.

Australian base metals producer Kagara Ltd., has stated it has temporarily suspended operations at the Baal Gammon polymetallic project in Queensland after a restructuring of the company’s banking arrangements affected its short term cash flow.

Australian coal producer Gloucester Coal Ltd., has stated its total output was up 273% year on year for the March quarter.

Aurico Gold Inc., has sold the El Cubo silver-gold mine and v silver-gold project to Endeavour Silver Corp., for US$250 million.

Shareholders at Pan American Silver Corp. and Minefinders Corp Ltd., have voted to approve the former’s US$1.5 billion takeover offer.

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EU slams governments for not enacting growth laws

BRUSSELS  — The 27 member countries of the European Union have been slammed for not implementing laws designed to boost growth on the crisis-hit continent.

The President of the European commission Jose Manuel Barroso delivers his statement on how to combat the economic crisis, at the European Parliament Wednesday, April 18, 2012 in Strasbourg, eastern France.

The criticism, from the president of the European Union’s executive Commission, comes as the EU finds itself increasingly under pressure to do more to get its economy growing again as many of its members slash government spending, pushing some states into recession.

International bodies like the Organization for Economic Cooperation and Development have long pointed out that the EU’s internal market — which in theory should allow people and businesses to move as freely in Europe as they can in the U.S. — often falls short in practice.

“It is incomprehensible that member states are still not fully implementing growth-friendly legislation we have in place,” European Commission President Jose Manuel Barroso told the European Parliament in Strasbourg, France.

The European Commission for years has been pushing states to remove administrative barriers that prevent workers from taking jobs and companies from offering services in other EU countries.

The EU’s internal market “is probably the largest engine for growth within the European Union,” Barroso said. “It gives European business unfettered access to other companies and half a billion consumers and allows them to develop the scale to compete globally.”

Barroso spoke after the Commission approved a series of initiatives to boost jobs and growth in the crisis-hit bloc. Many of the proposals in the 27-page plan have been made before but have failed to overcome resistance by governments.

The push to free up jobs has become increasingly urgent as unemployment in Europe has jumped to more than 10 percent as the continent struggles with a series of debt crises that have caused Greece, Ireland and Portugal to seek a bailout .

Joblessness varies widely from country to country, however. In Spain and Greece, unemployment stands above 20 percent and among young people almost one out of two is looking for a job. In rich countries like Germany, Austria or the Netherlands the unemployment rate is below 6 percent.

But getting a job in Germany or Austria is difficult for a Greek or Spaniard. Not only do most jobs require workers to speak the local language, there are also practical and administrative barriers.

The Commission called Wednesday for an easier way to transfer a worker’s pensions from country to country and the way cross-border workers are taxed to be simplified. Job seekers should be able to receive their unemployment benefits for up to six months while they are looking for work in another country and non-nationals should be hired for jobs in a country’s public sector, it added.

Getting governments to implement such initiatives is not easy. Citizens are often wary of foreign workers — even in countries with relatively low unemployment — and some rich states have seen nationalistic parties rise in the polls.

The EU has also come under fire from unions for its push to make the labor market more flexible — making it, they argue, easier to fire workers. The Commission argues that knowing they can easily get rid of workers during a slump would encourage businesses to hire more in good times. However implementing the reforms in the middle of an economic crisis can create more pain in the short-run. Critics also warn that shifting taxes away from income to consumption on things like energy — as the Commission has long favored — will effectively leaves workers with less money as their bills rise.

Laszlor Andor, the EU’s commissioner for employment and an outspoken critic of the focus on austerity, said governments needed to do more to ensure people who work full-time make enough money to live.

Even when adjusted for varying price levels, minimum wages range for less than €300 a month in countries like Bulgaria to almost €1,500 in rich states like Luxembourg — leaving many workers below the poverty line. Some countries, such as Germany, don’t have a minimum wage at all.

While low wages can make country’s exports more competitive, they also hurt consumption in rich states.

In addition to strengthening its internal markets, Barroso said the EU should try to improve its trade relations with non-European countries, including the United States.

“The United States is our largest economic partner,” Barroso said, adding that trade between the EU and the U.S. was worth almost €450 billion last year and that they had invested more than €1 trillion in each others’ economies.

“Any further gains, including through reducing non-tariff barriers, would be significant for both sides,” Barroso said. “We are exploring ways in which to broaden and deepen these ties.”

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US stocks higher on better global data

US stocks opened higher overnight helped by data showing the US trade deficit narrowed in February and positive indicators in Asia and Europe.

The Dow Jones Industrial Average rose 37.39 points (0.29 per cent) to 12,842.78 in the first five minutes of trade.

The broader S&P 500 gained 3.9 points (0.28 per cent) to 1372.61, while the tech-heavy Nasdaq climbed 8.21 (0.27 per cent) to 3024.67.

“Data around the globe has been generally better than expected, and that, coupled with the mixed Italian auctions, has aided global equity markets,” said

Eurozone industrial production rose in February after being either flat or falling in previous months, official figures showed overnight.

Meanwhile the US trade gap shrank in February on the back of an unexpected drop in imports, mainly from China, according to Commerce Department data released overnight.

The US trade deficit fell to a seasonally adjusted $US46 billion ($44.78 billion), from a revised $US52.5 billion ($51.11 billion) in January, sharply below the average analyst estimate of $US53 billion ($51.59 billion).

Traders appeared to shrug off an unexpected rise in weekly data on initial unemployment claims, an indicator of the pace of layoffs.


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Markets Live: Miners lead share gains

The Australian sharemarket closed higher today, trimming early gains as regional markets wavered.

4.55pm: That’s all for today. Thanks for reading this blog and sending us your comments. We’ll be back tomorrow at 9.30am.

4.38pm: The dollar hardly reacted to Glenn Stevens’ speech in Hong Kong, where the RBA governor said the Australian economy is not doing too badly.

The Aussie was last hovering around $US1.06, up from Friday’s close. It flexed its muscles a bit more against the yen, last trading at 88.4 yen and building on a bull trend that has delivered double-digit gains so far this year.

It has gained more than 12 per cent since January 1. The yen has been under pressure following last month’s surprise easing by the Bank of Japan, which made the yen the funding currency of choice for carry trades.

4.18pm: Among the major sectors, materials added 0.7 per cent, while financials gained 0.4 per cent and energy stocks rose 0.3 per cent. Gold stocks weighed on the market, falling 1.6 per cent, while telcos lost 0.9 per cent.

4.14pm: The market has closed, well off the day’s highs. The benchmark S&P/ASX200 index gained 14.6 points, or 0.3 per cent, to 4290.8, after earlier rising as high as 4309, while the broader All Ords index rose 16.5 points, or 0.4 per cent, to 4381.2.

4.04pm: The RBA chief also said the economy is not doing too badly but further restructuring will be needed to boost productivity, something that was outside the scope of monetary policy.

Mr Stevens noted that recent Australian data on gross domestic product (GDP) suggested the economy was running more slowly than expected. But other figures, such as business surveys, pointed to growth around the historical trend of 3.25 percent to 3.5 percent.

“Overall, recent economic performance in Australia is not too bad, particularly when compared, over a run of years, to a number of other advanced economies,” said Mr Stevens.

4.02pm: Reserve Bank governor Glenn Stevens has warned that Asian growth will be held back if economies in the region don’t find a way to bolster domestic consumption.

Domestic demand in Asia outside of China and Japan remained as weak now as in 1997-98 when the Asian financial crisis hit, Mr Stevens told an audience of institutional investors at a Credit Suisse conference in Hong Kong today.

“It is not a sustainable model to expect developed world households to consume ever higher volumes of the output of Asian factories with borrowed money,” sid Mr Stevens, referring to the export-driven model favoured by nations like China which rely on robust consumption of goods exported to the US and Europe.

3.51pm: Shareholders will be hit with double taxation on dividends from miners if the federal government’s mining tax legislation is passed, Australia’s biggest and oldest listed investment company says.

The minerals resource rent tax (MRRT) legislation, due to be voted on by the Senate on Monday night, will, if passed, be unfair toward shareholders, Australian Foundation Investment Company (AFIC) says.

‘‘The proposed mining tax … gives no credit to shareholders,’’ AFIC chairman Bruce Teele told shareholders at a meeting in Melbourne. ‘‘There’s no franking element,’’ he added, referring to the credit that represents the tax resource companies have already paid.

3.46pm: Do you have a small business and want some advice? Join Yellow Brick Road chief Mark Bouris (@markbouris) on Twitter from 4-5pm (AEDT) today for live Small Business Q&A. Please use the #mybusiness hashtag.

3.28pm: One stock taking off is Elders. It’s just won a $38.5 million repayment dispute with the Australian Taxation Office.

The company’s shares came out of a trading halt and were recently up as much as 4 cents, or 19 per cent, to 25 cents.

All up, the ruling should be worth $65 million to Elders’ profit.

3.16pm: Action of a different sort:

China, the world’s top weapons importer for much of the past decade, has fallen to fourth from second on an annual list from the Stockholm International Peace Research Institute.

China received 5 per cent of the volume of international transfers of “major conventional weapons” from 2007 to 2011, Sipri said in a report released today. The total was half that of India, which last year overtook China as the world’s largest recipient of arms, and less than South Korea and Pakistan.

Most of China’s weapons imports are Russian since the US and Europe maintain a ban on such shipments since the June 4 crackdown in 1989.

The volume of worldwide arms transfers in 2007-2011 was 24 per cent higher than in 2002-2006, the report said.

China’s arms exports nearly doubled in 2007 to 2011 from five years earlier, Sipri said, making it the world’s sixth-biggest supplier after the United Kingdom. About two-thirds of China’s weapons were sold to neighboring Pakistan.

3.09pm: Not a lot of action around the region today. Most markets are up but only modestly so. The ASX200 is virtually the biggest gainer.

Even the markets in retreat, such as mainland China, are off only about one-third of one per cent.

No wonder volatility indexes are way down, with the VIX in the US at its lowest level since mid-2007.

3.01pm: Another resource company is preparing to restart operations after cyclone Lua passed through the Pilbara, missing much of the main extraction industries.

Apache Corp said it’s making preparations to restart its Stag oil field off the coast of northwest Australia after the passage of Lua.

“Apache is progressively remobilising Stag platform and affected drilling operations. Production remained online at all other facilities throughout this weather event,” spokesman Matthew Coomber said in an emailed statement.

Stag oil field produces around 8,800 barrels per day (bpd) of oil.

2.56pm: While Australian politicians have been wrangling over a mining tax, our neighbors in Indonesia have made their own move – targetting foreign-owned miners.

Basically, foreign firms are to reduce their shareholding to below 50 per cent within 10 years of starting production.

Among local miners taking a bit of a hit from these legal requirement (sovereign risk anybody?) is Intrepid Mines.

Shares of Intrepid have fallen for an 8th consecutive session today, falling as low as 79 cents today (to be about 25 per cent lower in 2012.)

Intrepid explores for gold, silver and copper in East Java.

2.45pm: To follow up the earlier entry about How to make money on QBE. worth noting QBE shares are up about 3 per cent today – placing them within the top 10 gainers at last glance.

2.28pm:  Embattled Tasmanian timber company Gunns has admitted it could have lost a major investor because of social concerns.

The Richard Chandler Corporation pulled out of a $150 million investment in Gunns earlier this month amid concern from business groups and the state opposition that the deal had been sabotaged by environmentalists. The deal would have given RCC a 39 per cent stake in Gunns, which is $600 million in debt and desperate for a joint venture partner in its controversial pulp mill.

‘‘It is the company’s understanding that RCC decided not to proceed with the proposed investment based on its view that, in aggregate, the investment did not meet the social criteria of RCC’s previously stated evaluation framework,’’ Gunns says in a market update to the ASX.

2.24pm: CVC Capital Partners and Goldman Sachs have struck a deal in which $975 million of mezzanine debt in Nine Entertainment will be converted into equity on the condition that CVC is able to refinance the entertainment companys burdensome senior debt, The Australian is reporting on its website, citing unnamed ‘‘people familiar with the deal’’.

CVC is kicking off a roadshow in the US and UK this week to test investor appetite for the refinancing of Nines $2.7 billion in senior debt which matures in February 2013, the people said.

2.22pm: One important event coming up this afternoon is RBA governor Glenn Stevens’ speech at a Creidit Suisse conference in Hong Kong, expected at 4pm Sydney time.

‘‘Stevens’ speech will be listened to very carefully because that’s another sign on how the Reserve Bank’s viewing our market,’’ says Nomura currency sales director Kurt Magnus. ‘‘We’re expecting mildly hawkish. I think the Aussie will trade up to the top of its range.’’

The dollar is trading little changed at 88.34 yen, near a 10-month high against the Japanese currency. It’s also buying $US1.0593 after earlier reaching $1.0614, the highest in more than a week.

Traders are expecting the central bank to cut its key rate by 38 basis points over the next 12 months, a Credit Suisse index based on swaps shows. That’s down from 53 basis points last week.

2.15pm: Most Asian markets dropped after IMF chief Christine Lagarde warned of the risk of slowing growth in emerging markets and home prices in China posted the worst performance in a year.

China’s ‘‘property market is still the biggest risk the economy is facing now and there’s lots of uncertainty to the sector,’’ says Wu Kan, a Shanghai-based fund manager at Dazhong Insurance. ‘‘Earnings and the economy have yet to bottom out.’’

2.10pm: While the market is waiting for the details on the new David Jones “strategic plan” the retailer’s board is voting on, investors are also keen to find out how DJs has done in the past couple of months.

Analysts expect David Jones will post a 15 to 20 per cent dip in first half profit, in line with its earlier guidance, amid tough headwinds facing the retail sector.

OptionsXpress market analyst Ben Le Brun says DJs is facing the same retail headwinds as rival Myer which unveiled a near 20 per cent drop in first half profit last week:

  • Expectations going into this result are most definitely depressed. But, when they come off such a low base, all DJs will really need to do is come somewhere in line with ball-park expectations and there will be some upside in the stock.
  • He says analysts will look for any sign of another downgrade on the company’s full year result.
  • There’s no bricks and mortar retailer in Australia that’s out of the woods.

2.07pm: Woodside has restarted production at its Enfield oil field off the coast of Western Australia after the passage of Cyclone Lua over the weekend.

“Production remains shut-in from the Vincent oil field off the North West Cape and the Cossack, Wanaea, Lambert and Hermes oil fields on the North West Shelf,” a spokeswoman said.

2.01pm: Ratings agency Fitch has lifted Telstra’s outlook to stable from negative. The long-term issuer default rating and the senior unsecured rating have been affirmed at ‘A’. The short-term IDR and the commercial paper rating have been affirmed at ‘F1’.

The outlook revision and ratings reflect that, the now contractual future cash receipts from NBN Co will largely mitigate the company’s loss of revenue and higher business risk following transfer of public switched telephone network (PSTN) infrastructure to NBN, Fitch says.

Today, however, is not a good day for Telstra shares, with the price sinking 0.8 per cent to $3.23.

1.58pm: Gold has inched higher alongside equities and oil, rebounding from a weekly decline, on speculation that data due this week will show further signs that the global economy is strengthening.

Spot gold is up 0.2 per cent at $US1662.68 an ounce, after falling 3.1 per cent last week.

‘‘Gold is likely to trade sideways for a while, because while it could rally with risk assets, it could also be pressured by lower haven demand,’’ says Sun Yonggang, an analyst at Everbright Futures Co.

1.54pm: Here’s how regional markets are doing today. Bit of a mixed bag, with Chinese stocks under pressure after the nation’s home prices slumped:

  • Japan (Nikkei): +0.2%
  • Hong Kong: -0.1%
  • Shanghai: -0.4%
  • Taiwan: -0.7%
  • South Korea: +0.4%
  • Singapore: +0.45%
  • New Zealand: -0.4%

1.50pm:  Almost two-thirds of home loan customers are contemplating applying for a fixed-rate mortgage to cover part or all of the cost of buying a property because of uncertainty about lending rates, a survey shows.

The biggest concern for borrowers is whether banks and other lenders will follow the lead of the Reserve Bank in future rate decisions, Loan Market corporate spokesman Paul Smith said releasing the findings of a new online survey.

1.45pm: QBE may have been battered after its profit downgrade but an arbitrage opportunity offers a chance for some ‘’intelligent speculation’’, writes Intelligent Investor’s Nathan Bell.

1.31pm: Here’s another eagerly anticipated event: Apple will say tonight what it intends to do with the hoards of cash it has been holding for its future.

The company has an estimated $US98 billion in cash and securities, with investors calling for it to be released or put to work. Apple’s business has been going from strength to strength at the hands of new CEO Tim Cook.

Mounting anticipation over a buyback, along with hopes the newest iPad will keep sales momentum strong, helped propel Apple’s stock to a record high this month past $US600 a share.

Here’s a chart showing Apple’s amazing share performance over the past five years, compared to the S&P500 performance and the performance of a tech sector index:

1.21pm: Lynas Corp has fallen 1 per cent to $1.2225 after a report that the Malaysian government will set up a committee to monitor the company’s rare earths refinery in the country to consider final approval and ongoing operation.

1.14pm: David Jones is not the only company in a trading halt today:

  • Agribusiness Elders was in a trading halt as it awaited the outcome of a tax matter before the Federal Court. Elders last traded at 21 cents.
  • Woodchipper Gunns remained suspended from trading as it said it was still working at finalizing a capital raising. Gunns last traded at 16 cents.

1.09pm: IG Markets market strategist Stan Shamu said investors appeared to be feeling a little more confident, but it remained to be seen whether the benchmark S&P/ASX200 index would stay above 4300 points.

‘‘We did see a little bit of an improvement in risk appetite on Friday,’’ Mr Shamu said.

‘‘With the US dollar retreating a little bit, commodities have managed to edge a bit higher. We have seen materials (stocks) open higher today. Energy stocks are doing alright as well, after a nice move for oil on Friday.’’

1.03pm: Aviation reporter Andrew Heasley writes that an alliance of trade unions has launched a joint campaign to save thousands of Qantas engineering jobs at risk as the airline reviews its maintenance operations in Australia.

While the licensed aircraft engineers’ union fears a decision has already been made to axe the Tullamarine workshop, three other unions — the AMWU (Australian Manufacturing Workers Union), the AWU (Australian Workers Union) and the ETU (Electrical Trades Union) — have joined forces to lobby the federal and state governments, and the airline, to help save local jobs.

AMWU Assistant National Secretary Glenn Thompson warned the unions would lobby governments to fight for the jobs of 6000 Qantas engineering employees and 350 apprentices.

12.56pm: Share market darling Campbell Brothers is expanding its food testing operations with a $39 million acquisition in the United Kingdom and Ireland.

Campbell Brothers primarily provides laboratory services to the mining sector, and its shares have soared by more than 60 per cent in the last six months. The purchase of two food testing businesses would accelerate its development of a global food and pharmaceutical testing business, managing director Greg Kilmister said.

Its shares are 1 per cent higher today to $62.40.

12.48pm: The Australian dollar has continued to rise towards $US1.06 on the back of a weaker US currency. The Australian dollar was recently trading at $US1.0597, up from 105.28 cents on Friday afternoon.

Commonwealth Bank foreign exchange strategist Peter Dragicevich said a weaker greenback had propelled the Aussie dollar higher, but a speech from Reserve Bank of Australia (RBA) governor Glenn Stevens later on Monday would provide further guidance.

‘‘I think markets are keenly awaiting Glenn Stevens’ speech later this afternoon, so we’re not expecting too much action until then,’’ he said.

‘‘Our view is that the governor will be more optimistic about the global economy, particularly around the Asian economic story. That should provide the Aussie with a bit more support.’’

12.36pm: Meanwhile, there are signs of interest creeping back into the local stocks.

Here’s a chart showing the weekly turnover of the Australian stock exchange over the past year.

Last week saw weekly turnover reach the highest level since November. Can the trend continue?

12.24pm: Back to the local markets. ASX200 is hovering above the 4300-point mark, with miners still leading the way.

One stock on the move earlier was Ten gaining almost 5 per cent earlier after the TV network said it is considering selling its outdoor advertising business Eye Corp. There’s already been some consolidation in the fast-growing outdoor ad market.

Ten shares have since pared their gains, but remain about 3 per cent higher for the day.

12.18pm:Actually, here’s the full story: Cambodia rejoins the world of stocks.

Worth bookmarking for latter, especially with comments like this one:

At one of the stock-trading seminars in Phnom Penh, Paul Quach was taking notes and mulling whether to seek a public listing for his seven-year-old company, which operates seven school campuses in the capital.

Quach, chief financial officer and vice chairman of the firm, Mengly J. Quach Group, majority-owned by his brother, ran through Cambodia’s jungles to Thailand when he was 17 to flee the turmoil in his country. Now 48 and a US citizen, he returned to Cambodia five months ago to help build the company.

“After I understand more, we can think about an IPO,” said Quach, who added that he is amazed that the ravages of war have been replaced by progress and that the country is drawing people from all parts of the world.

“Cambodia is growing very rapidly, very fast,” said Quach. “The same jungle where I escaped from has become a casino, a playground where tourists go.”

12.08pm: Here’s a landmark: Cambodia is about to hold its first share sales since before the horrendous Khmer Rouge takeover of power in 1975.

The country’s stock exchange will start trading on April 18, with Phnom Pehn Water Supply Authority offering, ah, liquidity for the market.

The stock exchange actually opened last July without a single listed company.

Demand for the state-controlled entity was 10 times the roughly $20 million on offer.

Next up, Telecom Cambodia and Sihanoukville Autonomous Port – both state-controlled. They plan to sell shares over the next year, according to Bloomberg.

12.01pm: Parliament is sitting for the last week before the federal budget in early May – a relief to many.

Prime Minister Julia Gillard says the government won’t be backing changes to its minerals resource rent tax (MRRT) legislation in the Senate. The Australian Greens will bring a raft of amendments to the bills, but say they will vote in favour of the legislation in the Senate on Monday evening.

Ms Gillard told reporters the government was determined to deliver MRRT-funded tax cuts to business.

‘‘We will bring the legislation to parliament exactly as we outlined,’’ she said.

11.55am: Looks like the markets will end morning trading near the highs for the day. Energy stocks are higher, but the 0.6 per cent rise is basically pacing the overall market.

Materials are the main advances, rising 1.1 per cent while financials are up 0.8 per cent.

11.47am:Interest rate futures are still only showing the prospect of an April RBA rate cut as a one-in-five chance, despite chatter about sluggish growth (outside mining).

Meanwhile, the calm descending on global markets (for now) seems to be flowing through to the major banks in the form of lower funding costs, as BusinessDay‘s Eric Johnston reports:

Signs of funding costs are falling away for Australian banks after ANZ’s monster $3 billion covered bond issue was priced late Friday.

The four-year funding issue, was rushed at by institutional investors, pushing pricing down to 95 basis points over the benchmark swap rate.

The issue marks the first four-year covered bond issued by an Australian bank into domestic or offshore markets and is also among the tightest pricing.

At the start of the year Commonwealth Bank paid a hefty 175 basis points for a $3.5 billion covered bond issue. The five-year issue marked some of the highest costs paid by a major bank for funding in more than 15 years.

11.36am: Lot of interest lately in the rising oil price.

Since the Tapis oil price is the most influential fix for Australia’s oil prices, here’s a chart of how it’s been travelling lately.

The graph in Aussie dollars, and shows you need to go back to the second half of 2008 to find a similar level. More pain at the browser to come, perhaps.

11.27am: Here’s an early lunchtime read: Michael Pascoe says that despite some well-publicized recent shopping sprees, the group buying novelty seems to be wearing off.

Quantium’s group buying index has been falling while online retailing overall continues to grow apace, as the following graphic shows:

11.12am: Among the big miners:

  • BHP is 1.62% higher to $35.53
  • Rio is 1.4% higher to $66.03
  • Fortescue is 3.44% higher to $6.01

11.02am: As the first hour of trade passes, stocks are showing a gain of 0.7 per cent. That’s roughly where the majority of voters in today’s poll thought the ASX200 would close today. Can it hold the early gains? We’ll see.

Thirty one per cent of voters predicted the market would close between 0.5 per cent to 1 per cent higher. Twenty three per cent of the 300 voters were more optimistic, forecasting a close above 1 per cent higher.

But the bears made their feelings clear, too. A combined 20 per cent of you thought the market would close the day lower.

10.58am: Patersons Securities associate director Mark Goulopoulos said resources stocks posted solid gains at open as concerns over a hard landing in China had eased slightly during Friday’s trade, when Chinese markets had a strong close.

‘‘We are getting a good bid back in the metals stocks today,’’ Mr Goulopoulos said. He said today’s start, compared with how Wall Street fared during Friday night’s offshore session, was a reflection of the local market’s under performance relative to US stocks last week.

‘‘Although we had a reasonable sort of week, they were a lot better than we were, so there is probably an element of catch-up at the moment,’’ Mr Goulopoulos said.

10.53am: Local shares were a little slow out of the blocks today but have now added 0.6 per cent for the day. Consumer staples and health stocks are still down about 0.5 per cent for the day.

Info tech stocks are enjoying the buoyant mood, adding 1.2 per cent. Materials stocks and miners are 1.1 per cent higher. Health stocks are also 1.1 per cent higher. Energy stocks are 0.4 per cent higher.

10.49am: The Australian Financial Review reported this morning that David Jones’ earnings from its American Express credit card alliance could fall to between $24 to $27 million a year – down from the $51 million expected this year.

The AFR pointed out that financial services comprise 20 per cent of the company’s earnings.

10.44am: Back to the David Jones trading halt for a moment. Speculation now turns to what directors are meeting tomorrow to discuss.

The company requested the trading halt after reports said its earnings from its credit card business will drop significantly after 2013. David Jones is scheduled to release its first half financial results on Wednesday, and has indicated it will also reveal new strategies for the business.

  • ‘‘While the company does not believe that there has been any leak of confidential information by the company and that the speculation is based on publicly available information, the company considers a trading halt to be appropriate in the circumstances,’’ it said.

10.40am: Varying returns among the big banks today, with three out of four in positive territory:

  • CBA is 0.08% lower to $48.91
  • ANZ is 0.24% higher to $22.56
  • NAB is 0.08% higher to $24.20
  • Westpac is 0.7% higher to $21.28

10.36am: To some of the worst-performed companies on the ASX200:

  • Envestra – down 4.38%
  • Woolworths – down 2.38%
  • Beach Energy – 1.92%
  • Telecom New Zealand – down 1.85%
  • Lynas Corp – down 1.62%

10.31am: Ten Network shares have posted a handsome gain of 3.7 per cent so far today on news it is considering selling its outdoor advertising business EYE Corp.

EYE is an international business, providing what is known as ‘‘out-of-home’’ advertising at airports, shopping centers, universities and alongside roads.

Ten says in light of recent corporate activities within the Australian out-of-home industry, Ten Holdings is currently undertaking a strategic review and considering strategic options for EYE.

EYE generated earnings of $18.4 million in the 12 months to August 31, 2011, a rise of 22.7 per cent from the previous 12 months.

10.27am: To some of the early gainers:

  • Aquarius Platinum – up 5.7%
  • Transfield – up 4.07%
  • Billabong – up 3.8%
  • Ten – up 3.66%
  • Fortescue – up 2.25%

10.20am: David Jones have been placed in a trading halt ahead of a board meeting tomorrow convened to “consider a strategic plan”.

It’s shares last traded at $2.73, up 15% in 2012, not quite triple the overall market which has gained 5.7 per cent since the start of the year.

10.18am: Telecoms are flat. Gold stocks have lost 0.3 per cent and utilities are 0.4 per cent lower.

10.16am: Health stocks are leading the pack today with a 0.8 per cent gain. Materials and metals & miners have added 0.5 and 0.6 per cent respectively. Industrial, financials and consumer discretionary stocks are 0.3 per cent higher.

10.12am: In early trade, the All Ordinaries index is 14.6 points higher, or 0.3 per cent, to 4379.3, while the benchmark S&P/ASX200 is 13.1 points higher, or 0.3 per cent, to 4289.3.

Consumer staples, gold and utilities are all down. All other sectors trading in positive territory.

10.06am: Early take – shares up but not spectacularly. Without all companies trading, markets are showing 0.2 per cent gains.

9.57am: Australian bond futures are slightly softer, following positive data from the US and good market sentiment. Nomura rates strategist Martin Whetton said markets were optimistic, following the release of on-target US inflation figures, and strong retail trade data.

‘‘Things are looking generally better. Whether that plays out remains to be seen,’’ he said. ‘‘Certainly, the feeling in markets is that things are looking better, and data is certainly playing out that way.’’

At 8.30am the June 10-year bond futures contract was trading at 95.690 (implying a yield of 4.310 per cent), down from 95.710 (4.290 per cent) on Friday. The June three-year bond futures contract was at 96.180 (3.820 per cent), down from 96.200 (3.800 per cent).

9.55am: Independent sharemarket and economic analyst Michael Heffernan expects a firmer market open this morning, although overseas markets had been pretty lacklustre on Friday.

“I don’t think we’re going to open with any great gusto frankly,” he said.

“The consolidation of momentum we’ve seen in the past couple of weeks is going to continue in the absence of any real bad news on the horizon,” he said.

“My view is that the European-Greek situation is well on the way to being neutralized. The acuteness of the pain is much less.”

Mr Heffernan said bank stocks would likely continue to improve.

9.51am: Insurance Australia Group (IAG) will raise $350 million through the issue of new hybrid shares. The insurer said it would issue convertible preference shares, which will convert to ordinary shares on May 1, 2019.

The new shares will be issued to institutional shareholders at $100 each, which could raise about $350 million, IAG said. The funds would be used for general corporate purposes.

9.47am: Rio Tinto’s mines in Western Australia’s Pilbara region, and other businesses, escaped mostly unscathed when Tropical Cyclone Lua, the biggest storm of the year, moved through the area two days ago.

“I’ve never seen so minor damage from so strong a cyclone,” Les Hayter, manager of public information at the Fire & Emergency Services Authority of Western Australia, said yesterday in a phone interview. “It’s unbelievable,” said the veteran of 15 cyclones.

9.43am: Bonds of all types worldwide are generating their biggest losses since 2010 this month, raising concern that the four-year bull market that pushed interest rates to record lows may be ending as the flood of easy money from the US Federal Reserve subsides.

“For a very long time, the market dynamics in interest rates have been overwhelmed by Fed monetary policy,” said Jeffrey Rosenberg, chief investment strategist for fixed-income at New York-based BlackRock Inc., the world’s biggest money manager which oversees $3.5 trillion. “Has the big inflection point been reached?”

9.40am: Heading offshore for a moment, IMF chief Christine Lagarde said measures taken to fight financial woes in Europe and the US were starting to pay off, in a cautiously upbeat assessment of the global economy.

Lagarde – in Beijing for a two-day trip to attend a high profile forum on China’s development and hold meetings with her economic counterparts – said:

  • “Even just a few months ago, the situation was decidedly gloomy. Indicators for the last quarter of 2011 – namely for Europe and the United States – did not provide much reassurance,” Lagarde said in a speech at the forum.
  • “Yet, today, we are seeing signs of stabilization; signs that policy actions are paying off.”

9.38amLooking ahead, it’s a quiet week for local economics and company news, with the RBA due to release the minutes of its March rates meeting tomorrow. David Jones and Kathmandu release first half results on Wednesday. Here are the highlights of this week’s local news calendar:

  • Tuesday: RBA releases the minutes of its March policy meeting
  • Wednesday: David Jones and Kathmandu release first half results
  • Thursday: Sigma Pharmaceuticals and Washington H Soul Pattinson half year results
  • Friday: PaperlinX general meeting and Premier Investments first half results

9.35am: A 2 per cent rise in oil stocks late last week is expected to support local markets today.

“For our market, the oil price was up significantly so that’s going to be good news for the energy stocks,” said CommSec’s Craig James.

West Texas Intermediate crude oil rose two per cent to $US107.25 and Brent crude oil jumped 2.9 per cent to $US126.10.

ICAP’s chief economist Adam Carr in a statement attributed the moves to “a pure growth play – and maybe a bit of US dollar selling”.

9.32am: Australian shares take positive leads into the start of the week, with the futures markets pointing to an early gain of around 0.7 per cent. For a full look at today’s business check the need2know and the business press digest. Here are the key markets links:

  • The $A was higher to $US1.058
  • US stocks notch best week in three months 
  • European stocks hit 8-month highs
  • Gold caps weekly decline
  • Oil climbs to 10-month highs
  • Wall Street week ahead: Rally rolls on
  • Australian business calendar: 19-24 March
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Gold investment, paper style

One can now invest in gold minus the bulk, through what is casually termed as paper gold’.

When Neng Azhanie Adzman, 27, got married in March two years ago, the first gift she received from her mother-in-law was a gold bracelet.

“Most Malay girls will have gold jewellery, that’s the norm. Also, my husband’s family from Kelantan really believes in investing in gold.

“The problem, though, is that I’m not really comfortable wearing jewellery, so I’ve never been the type to buy gold jewellery,” she says.

So when she and her husband chanced upon a leaflet promoting the gold deposit account at a local bank in June last year, they decided to go for it.

Since that initial investment of RM500, Neng Azhanie has invested RM15,000 in gold. However, she recently moved her investments back to physical gold, for personal and religious reasons.

“Over the years, the value of gold has been going up. I think this is something which will be valuable for me to have in the long term,” she says.

Another investor, who only wanted to be identified as Adrian, says he had just opened a gold deposit account.

“I’ve always known you can invest in gold but in my mind, it has always been physical gold. It was only recently that my family members told me about the gold deposit account,” he says.

“I’ve only made a small investment, but it’s a start. I’ll see how things go this year before I decide whether to invest more. I am looking at gold to diversify my portfolio.”

With the price of gold soaring about 511% from US$278.95 (RM840) per ounce 10 years ago, to about US$1,700 (RM5,115) per ounce to date, consumers are not the only ones realising the potential of gold investments. Banks have been taking note too.

Maybank’s Community Financial Services head Lim Hong Tat says the public’s response to its Maybank Gold Investment Account (MGIA) has been very good since it was relaunched in May 2011. (It was previously called the Gold Savings Passbook Account.)

Golden returns: With the price of gold soaring about 511%, demand for gold investments has grown.

“From the repositioning of MGIA from May 2011 till March 6 this year, the number of accounts has grown by more than 100%.

“Demand for gold investments has grown. Just over a period of 11 months, the number of accounts, as well as the investment value for MGIA, has more than doubled its size,” he says.

The MGIA allows investors to buy and sell gold at a daily price in ringgit via a passbook without the hassle of keeping physical gold.

“One of the key features is that it requires only 1g of gold to open an account. The subsequent buying and selling is also fixed at a minimum of 1g of gold.

“When investing in gold, customers look for affordability, security, better returns, better protection and convenience,” he says.

Similarly, CIMB Bank’s Retail Financial Services head Peter England says the public’s response to the bank’s Gold Deposit Account, which starts at the ringgit equivalent of 5g of gold, has been “very encouraging”.

“Since launching the Gold Deposit Account in January last year, we have recorded a healthy average of RM25,000 investment per account. We now have close to 20,000 investors who have invested in this product,” he says.

What are the benefits of investing in gold?

“Gold is a non-yielding asset, unlike stocks which give a return in the form of dividends, or fixed deposit which earns interest. However, gold has appreciated steadily over the last 10 years and has shown good returns.,” he explains.

“The price of gold in the interbank market has appreciated over 400% over the last 10 years, giving an average return of 40% per annum.

“Over the last 10 years, gold has benefited from safe-haven demand amid the turmoil in global financial markets, the fall of the US dollar, the hike in oil price, and various geopolitical events.”

Customers, he says, frequently ask whether “paper gold” is backed by an equivalent placement in the gold market. He assures them that all customer purchases are hedged back-to-back in the interbank gold market.

Storing gold

Investing in “paper gold” has its benefits, including the practical aspect of storage and security, says Steven Yong, Strategist & Research head of Citibank’s Wealth Management Products.

“If you’re buying small amounts of gold, like jewellery and wafers, you have a place to store it and you’re not worried about robbers. But if you’re looking at investing in large amounts, then it becomes a problem,” he says.

“Where are you going to store the gold? Do you have adequate security? There are facilities to do that but in Malaysia, they are not readily accessible. Even with safe deposit boxes, how much gold can that hold? I’m talking about really large amounts.”

When advising customers on investments, Yong says Citibank always takes a portfolio basis approach.

“We advise customers to hold gold as part of their portfolio. It’s a hedge against inflation. I can’t tell you how much it will go up, but if you have it as part of your portfolio, gold can offset some of your volatility and the under-performers in other asset classes,” he says.

Citibank also offers a gold account, launched in July 2010, which requires a minimum investment of US$5,000 (RM15,050).

But what are the risks of investing in “paper gold”?

“The biggest risk would be market risk. Investors have to be aware that gold prices will fluctuate according to global market prices. And because it’s in foreign currency, there is also an exchange rate risk as well. They have to take that into account,” Yong explains.

Naturally, the next question would be where is gold headed this year?

Oversea-Chinese Banking Corp Ltd economist Barnabas Gan says that while gold has shifted from being a safe haven asset to behaving like a risk asset, his forecast is that it will climb to about US$1,800 (RM5,417) per ounce by the end of the year.

“That is on the assumption that QE 3 (third round of quantitative easing in the US) does not roll out. If it does, we are looking at gold prices of over US$2,000 (RM6,019) per ounce at the end of the year.

“At the moment, it’s at fair value. There’s definitely room for it to go up,” he says.

(Quantitative easing is a government monetary policy which is occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital, in an effort to promote increased lending and liquidity. The US Federal Reserve has so far rolled out two rounds of quantitative easing dubbed QE1 and QE2.)

If you’re wondering whether gold investments are for you, Standard Chartered Bank’s general manager of Wealth Management Lilian Long has this to say: “It’s important for you to know your own risk appetite, so that the bank can do the appropriate risk profiling for you. The investor also needs to know what his holding power is.

“If you put this money in, but you think you will need to take it out within a few months, then there is always that risk this investment may not work for you.

“With properties, it’s all about location, location, location! With investments, it’s diversify, diversify, diversify! One cannot go into a single mono-product solution. It’s like putting all your eggs in one basket.”

The bank promotes gold investments through its Premium Currency Investment Gold, but it requires a minimum investment of RM250,000 or its equivalent in foreign currencies. For individuals with net assets exceeding RM3mil, they can invest RM50,000 or its equivalent in foreign currencies.

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