Wall Street rose, fell and then bounced a touch at the end on mixed business and economic news, but for the third time this week, commodities was where the action was.
Wall Street finished up by just under 1% as a US Federal Reserve report spoke of falling levels of activity in many parts of the country since January, the services sector staged a small recovery last month, but the resuce of a major bond insurer, Ambac, continued to stutter along unconvincingly.
Our market will however be absorbed with the fate of ABC Learning Centres after the news it had sold 60% of its US business to private equity for more than $750 million, much of which will be used to cut debt.
Oil, gold and corn prices surged to records, and the prices of copper, wheat, sugar and a host of other commodities staged solid rebounds from Tuesday’s sell-off.
Driving this was another fall in the value of the US dollar, which dropped below 1.53 to the euro on the mixed economic news.
US credit markets are pricing in a cut of 0.50% and perhaps as much as 0.75% when the Fed meets on March 18, and that’s causing the US dollar to be sold off.
With the European Central bank, the Bank of England and the Bank of Canada meeting tonight our time and not expected to lower rates, except in Canada where there’s a new bank crisis emerging, the attractiveness of the dollar continues to fall.
This is driving more and more financial investors deeper into commodity markets, especially the huge oil market; gold because of its high profile and solid depth, and in the spotlight commodities such as grains, edible oils and copper which are in strong demand from China.
It’s verging on a boom of bubble proportions and copper prices are now with a few cents per pound of the all time high reached in May 2006. Oil closed over $US104 a barrel and gold jumped to well over $US995 an ounce before closing at $US988 an ounce.
Traders said the reason for the huge rallies of the past couple of weeks is easy to explain: commodities they say, are merely responding to the weaker dollar, and this trend will continue. As lonmg as the greenback falls, that’s going to boost commodities.
As a result those with an inflation hedge mentality are scrambling for cover and getting into commodities, not just gold.
The euro rose to a record $US1.5303 overnight
Crude oil jumped to a record $US104.56 a barrel, gold futures hit $US 995.20 an ounce, the highest ever.
Corn futures in Chicago soared as much as 3.6% to a record $5.7425 a bushel, before settling back at $US5.70. Wheat rose, as did other agricultural commodities.
May Comex copper futures jumped 16 US cents, or 4.2%, to $US3.9820 a pound.The metal hit a high of $US4.04 in May 2006. In London, LME three month copper closed 3.1% higher at $US8,674 a tonne, or $US3.93 a pound. Copper prices have risen over 43% higher in the past year.
………………………..
The Australian share market performance said it all yesterday: it bounced higher after a mixed day on wall Street and then gave up all the 1.1%-plus gains to close slightly lower.
It was as though all the confidence of the morning season slowly deflated like imploding balloon.
At the close it was more volatility in the financial sector and profit-taking blamed for the drop.
The ASX200 index was 3.7 points lower at 5376.6 and the broader All Ordinaries lost 7.6 points to 5471.6 but the the March share price index contract was 30 points lower at 5386.
The fall in Australia matched weakness in Asia where major markets were uncertain.
The market got off to a positive start despite a poor lead from Wall Street overnight, with the Dow Jones industrial average dropping 45.1 points, or 0.37 per cent, to close at 12,213.80.
The big miners were stronger, with BHP Billiton gaining 37 cents to $39.03 and rival Rio Tinto adding $1.27 to $133.75. Rio’s close is well above BHP’s 3.4 to one offer of $132.70.
The Banks were mixed, with National Australia Bank adding 60 cents to $28.10, ANZ losing 13 cents to $21.31, the CBA dropped five cents to $39.95 and Westpac lost 31 cents to $22.43 on earnings concerns..
Bendigo Bank lost 22 cents to $9.48 after its Adelaide Bank subsidiary lifted the cost of wholesale funds it supplies to mortgage brokers and originators by 0.40%, 0.15% above the Reserve Bank’s Tuesday rise.
Agricultural chemicals company Nufarm said its $230 million acquisition of two crop protection firms in the United Kingdom and United States will boost group net profit by $5 million this financial year, but Nufarm shares were untraded at $16.10.
ABC Learning Centres chief executive Eddy Groves reportedly did a deal to sell off the US centres and save the company.
The company’s shares remain suspended at $2.14 but are expected to resume trading today.
Retailers were mixed; with Woolworths added 72 cents to $29.69, Harvey Norman rose seven cents to $4.07 but David Jones dropped seven cents to $3.95, reversing some of Tuesday’s rise on its new four year plan. Wesfarmers, the owner of Australia’s second largest retailer, Coles, jumped 92 cents to $38.97.
Fashion retailer Just Group added 14 cents to $3.61 after the company reported a rise in half year profit to $40.1 million and said it was on track to deliver its target full year earnings per share growth.
Babcock & Brown Infrastructure fell 9.5 cents to 96.5 cents after it said it was considering selling non-core assets and reducing its $2.4 billion investment in the owner of the Natural Gas Pipeline Company of America, MidCon.
Asian stocks fell for a fifth day, led by financial and energy shares, after brokerage reports raised concern that bank earnings will decline and crude oil retreated from a record.
The MSCI Asia Pacific Index fell half a per cent in Tokyo, extending a f
