20 Jul 2007

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Should we be worried by the tightening credit conditions in the US? Yes, but not too concerned, yet. It should be monitored but so far it’s the top end of the market where the big boys play where the strains are being felt. But it does have the potential to spread across economies. We in Australia might be saved by China, which booms and booms.

This Week’s Contents

Credit Chill Grows

Slowly but surely a credit crunch is creeping across capital markets. It’s not a squeeze, more a constriction, not yet threatening, but it could end that way. The spiralling collapse in America’s subprime mortgage market and associated credit derivatives is the catalyst … read more

China Booms And Booms

When does an economy reach the overheating stage? In a developed world economy like Australia, it would be an annual growth rate  above five per cent, or maybe six per cent consistently for at least half a year, perhaps nine months. In real terms, meaning a nominal figure … read more

MBL Upbeat

By the end of the day yesterday, some of the early enthusiasm for Macquarie Bank shares had been extinguished. The early strength on the bullish pre-annual meeting statement by CEO, Allan Moss, and chairman, David Clarke, drove the shares up $1.62 to a day’s high of $92.48 … read more

WPL Does Well

Unlike 2006 and its surprises, 2007 seems to be a much smoother year for the country’s second ranking oil and gas group, Woodside Petroleum. Even though earnings last year were solid, they could have been better with production problems on the Northwest Shelf and in West … read more

Don’t Worry When The Election Comes

There’s a Federal election looming: later, rather than sooner, judging by the poor polls for the Howard Government. Normally, some people worry that the poll will be a disruption to the stockmarket, interest rates and the economy generally. But Dr Shane Oliver, the head … read more

Rio Churns Out The Tonnes

Rio Tinto is probably looking at higher earnings after revealing that iron ore production rose to record levels to meet strong demand from steelmakers, especially in China. As well, higher production of refined copper and gold from the Grasberg Mine in West Papua puts … read more

Oxiana, Everybody’s Target

The huge takeover made by Rio Tinto for Alcan re-rated several takeover candidates among Australia’s major miners, with the likes of Zinifex and Oxiana being top of the table in the eyes of many analysts, either merging or as separate targets. Both are, like Iluka and … read more

$A Bites Iluka

Yesterday, the Australian dollar was trading around 18-year highs for the second time so far this week, and you can imagine the pain and horror many mining companies feel as they watch the currency appreciate. All miners are going to feel the pain of a rise in the dollar … read more

Retailers Boom

More good news from major retailer, David Jones, with shareholders told of better than expected sales and earnings in the fourth quarter, second half and for the full year. On Tuesday, David Jones revealed the last two candidates on its short list for the preferred issuer … read more

Santos Loves LNG

Santos is not letting grass grow near any of its plans. The company is a hive of activity, no doubt stimulated by the impending completion of the review of the 15 per cent ownership cap by the South Australian Government. Earlier this week, it confirmed the completion … read more

Deals, Deals, Deals

Some of the corporate activity in the Australian mining sector is starting to resemble a soap opera with multiple plays, partners and companies popping up in different circumstances. There’s the old fashioned ‘knockout bid’ for Alcan by Rio which resembled a melodrama … read more

Boom Goes Flat

Boom Logistics hasn’t lived up to the first part of its name. The shares tanked yesterday, dropping by around 10 per cent on a profit downgrade that shouldn’t have really come as all that surprising. The downgrade was confirmation of a warning issued in early April that … read more

US Bonds

Once again the US bond market is signalling that investors are seeking quality amid a drift to uncertainty, and despite the optimism of Wall Street. Last Friday, with retail sales a little better than expected and once the numbers were dissected, the yield on the 10-year … read more

Who Will Be DJ’s Credit Card?

And now there are two, as retailer David Jones eliminates the fringe candidates on its beauty parade of potential issuing partners for its new branded credit card. The retailer said that Citigroup and American Express were the two final candidates for the face-off, with … read more

ERA Still All Rained Out

There’s been no improvement for uranium miner, Energy Resources of Australia, whose Northern Territory mining operations have been strangled by flooding since February-March, and look like continuing that way until next year. The company said in its second quarterly … read more

UBS Fund Downgraded

Swiss-owned fund manager, UBS, has paid dearly for the loss of high profile manager, Paul Fiani, and some of his workmates at its flagship Australian Share Fund, over the last few months. The loss of Fiani and other managers in recent months has been behind Standard & … read more

DJW Rides The Market

Djerriwarrh Investments, another of the investment companies associated with Goldman Sachs JBWere, has lifted net operating profit (excluding capital gains) 42.5 per cent to $54.9 million in the year to June. The company said yesterday that net profit (including realised … read more

Aussie Up Again

Another strong day for the Australian and New Zealand dollars (see below for a report on the Kiwi), but for differing reasons. The currency closed in Sydney at 87.30 US and the Trade Weighted Index was at an all time high of 70.1. It hit a high in overseas trading of … read more

Kiwi Inflation Jumps

Meanwhile, stronger than expected inflation figures across the Tasman got the market in a tizzy yesterday and sent the Kiwi dollar to a new 22 year high. A week ago it was a 12.6 per cent rise in house prices in May, yesterday it was the strong rise in inflation. Now … read more

Santos Confirms US Sale

Santos continues to clean itself up as the South Australian Government ruminates about whether to lift the 15 per cent shareholding cap on the company. The oil and gas producer revealed yesterday that it has entered into agreements to sell its exploration and production … read more

Aussie’s New Surge

The Australian dollar climbed over 87 US cents in US markets Friday night, so you can bet on the impact of the currency becoming an issue as we head towards the start of the 2007 annual results season early next month. The currency ended at 86.12 USc, after reaching above … read more

Commodities: Sugar On The Up

Far from the mid-year slump forecast in March and April, sugar is on the way up. For how long, no one is prepared to say. Some analysts are saying 11 to 12 USc/lb in the next couple of month, but then other analysts were forecasting a price around 8 USc/lb for July in … read more

RIO Calms Markets

Investors around the world have a lot to thank Rio Tinto for. The $A44 billion bid for Alcan, which looks like succeeding, changed sentiment in stock and credit markets late last week. The gloom flowing from the dodgy subprime lending and the financial derivatives supporting … read more

RIO Sells Its Alcan Bid

Rio Tinto has flagged that it is looking at selling some of its business units after it completed the $US38.1 ($44 billion) billion acquisition of Alcan. Naturally, that’s created some speculation that operations like diamonds may go, and even the industrial minerals … read more


Inflation and the US economy will be to the fore this week with the head of the Federal Reserve, Ben Bernanke, giving his half year, two days of testimony to the US Congress, the release of the producer and consumer price indexes, and an update on the state of the US housing … read more


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© Australasian Investment Review 2007

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