BUSINESS

The Reserve Bank is not worried about any short term impact on growth and inflation flowing from the impact of the floods in various states in the past few months.In fact Governor Glenn Stevens went out of his way to detail the RBA's thinking on the floods and their possible impact in his first post board meeting statement of the year which also revealed that the cash rate had been left on hold at 4.75%.The news saw the Australian dollar regain the $US1 parity level with the greenback.The bottom line from the statement is: the RBA is more happy with the economy at the moment, especially inflation, expects the floods to have some impact, sees the rebuilding helping offset that early negative impact in future quarters, but is still concerned about the tight conditions for labour, materials and other resources as the commodities boom grows.That decision was widely expected, especially after the better than forecast inflation figures for the December quarter, especially the underlying rate which fell to 2.25% in the three months to December while the headline rate was a touch lower at 2.7%.That in turn seems to have helped the RBA become more confident about inflation for the remainder of this year (we will get the first new forecasts from the bank in the Statement of Monetary Policy on Friday)."Inflation is consistent with the medium-term objective of monetary policy, having declined significantly from its peak in 2008. Recent data show underlying inflation at around 2

Despite industry conditions remaining more or less the same, builders expect a recovery soon based on answers compiled in the survey conducted by Master Builders Australia.

Lexus Australia and the 2011 Formula 1Qantas Australian Grand Prix have announced an initiative benefitting the Red Cross Victorian Floods Appeal by auctioning a drive in the Lexus CT 200h Celebrity Challenge via eBay.

Major Australian banks’ over reliance on international funding for their mortgage services leads to rising borrowing costs, which in turn push up interest rates being slapped on bank consumers, according to a credit rating agency’s report.

People living in Queensland’s coastal low-lying areas have been asked to evacuate to higher ground as soon as possible before Cyclone Yasi hits.

By Chris ShawWhile markets tend to be volatile in January, Barclays Capital notes February tends to be a relatively quiet month. In equities this usually translates to a more bullish performance in the emerging markets space but also to more subdued performance for developed markets.February is traditionally a weak month for Australian equities and Barclays expects this trend will continue tis year, giving the All Ords only a 45% chance of posting a gain this time around. India's SENSEX, the Shanghai Composite, the TOPIX in Japan and South Africa's JSE All Share Index are all given a better than 60% chance of closing the month higher, while major indices such as the Dow Jones, the FTSE100 and the Nikkei are ascribed 50-60% chances of gains.In the commodities space, Barclays notes aluminium tends to be the best performer in February and the analysts see a 62% chance of further price increases for the metal this month. This is well above the 50% chance given to copper.Precious metals could gain given odds of advances according to Barclays of 54% for both gold and silver, while energy looks more mixed with natural gas given a 50% chance of gaining against a 48% chance for oil prices.Among the currencies, Barclays notes February tends to be the worst month of the year for the US dollar against the Japanese yen as measured by both median and mean averages. To reflect this seasonal weakness Barclays gives the US dollar just a 37% chance of advancing against the yen this month.Most likely to advance in the analysts' view is the euro against the US dollar with a 63% chance, while the euro against the yen and the Aussie dollar against the greenback are both given 53% chances of gains this month. The New Zealand dollar appears set to outperform its Australian counterpart as Barclays gives the Kiwi currency a 61% chance of gaining on the US dollar in February. In fixed interest Barclays notes February tends to be the worst month of the year for Australian 10-year bonds, US 5-year and 2-year securities and 3-month Euroyen as measured by changes in yield. Each of these securities, along with US 10-year bonds, are being given a better than even money chance of delivering yield gains this time around.Least likely to see a yield increase at the long end, according to Barclays, are Canadian 10-year bonds at just 32%, while at the shorter-end the group ascribes the same percentage chance of a yield gain for 3-month Sterling securities.In terms of yield curves, Barclays points out the best median yield change in February typically comes from EU 2-year versus 10-year bonds, while the worst is delivered by the corresponding US securities. Odds for the month reflect this, Barclays giving a 58% chance of a steepening in the yield curve for the former and just a 25% chance for the latter.Investors should always keep in mind that seasonal patterns are just that. They do not provide a rock-solid blueprint for the future.FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.

By Greg PeelHands up. What two commodities dominate trade between Australia and India?If you assume coal is one of them, then you're spot on. But you may not have guessed that the Number One commodity is jewellery.Unlike China, India is devoid of coal. So great has China's growth in coal consumption been that China has now shifted, probably for good, to being a net importer rather than a net exporter. India now imports 59m tonnes of coal a year, with Australia as one source. Australia's coal exports to India are a one-way street.Jewellery trade between the two countries is, on the other hand, a two-way street. India is one of the world's largest manufacturers of jewellery but its own growing middle class ensures demand beyond that which is fashioned locally. Since reforming its economy in the nineties, India's two-way jewellery trade has become big business. In 2000, Australia imported $10.3bn worth of jewellery from India and exported $7.5bn to India. In 2009 those numbers were $39.3bn and $28.0bn. And the increase does not simply reflect, for example, the rise in the price of gold. Volumes have also increased significantly.These statistics are contained in a note produced this week by ANZ Bank economists. We all know that China is now Australia's trade “giant” and we are also aware that India is lurking, albeit forever eclipsed by its more advanced neighbour. But as of 2010, India is now Australia's fourth biggest export market behind China, Japan and Korea. With a bullet.Let's look at some of those numbers.In the nineties, India's export growth rate was around 9%. In the noughties (now complete) it was 17%. India's nineties import growth rate was 9%, and 20% in the noughties. Despite such growth rates, India's economy still remains a relatively “closed” one, which simply means domestic consumption accounts for the bulk of domestic output. Slowly but surely however, India is becoming a player in global trade. In 2000 India's trade-to-GDP ratio was 21% and in 2010 it was 35%.Australia has been a significant beneficiary of India's emergence in global trade. India's imports from Australia grew at a rate of 19% in 2000-05 and 30% in 2006-10, consistently outpacing India's total world import numbers. Australia is a top-ten import partner for India. In terms of bilateral trade between the two countries, that totalled $1.5bn in 2000 and $13.8bn in 2010.India's exports to Australia have nevertheless not seen similar rates of growth as in the other direction, and have indeed remained flat. Hence India's trade deficit with Australia is growing at a rapid pace. It now eclipses that of India's deficit with the ASEAN nations.The sorts of goods Australia exports to India have changed markedly in ten years. In 2000, about half of the total were crude materials and minerals (including coal) and 26% were manufactured goods. In 2010, manufactured goods have all but slipped off the dial, minerals have slipped slightly to just over 40%, but the big mover and shaker has been the aforementioned jewellery which in 2010 represented 46%.India, notes ANZ, is only just beginning the sort of industrialisation and infrastructure upgrade that has been in full swing in China over the past decade. India's jewellery demand is unlikely to subside in this new decade, but nor will its growth in demand for coal.FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.

The Australian Dollar regained some moreground after the release of stronger than expected globalmanufacturing activity in China, Europe and the US.Accordingly, stock markets were strong with the Dowleading the way, up 140 points to trade over 12,000.

The Dow Jones Industrial Average recaptured the 12000 level Tuesday, buoyed by bellwether earnings and encouraging manufacturing data, as traders looked past the unease rippling through the Middle East.

The US ISM manufacturing gauge rose to the highest level in more than six years in January (highest since May 2004), lifting from 58.5 to 60.8.

Signs of economic recovery world-wide as well as reduced pressure emanating from Egypt has helped the Australian Dollar push to 4-week highs in off-shore trade.

The Resource Sector Hits the Mother Lode as Mining Companies Increase SpendingBy Tony D’Altorio, Investment U Research Tuesday, February 1, 2011Samuel Brannan became the richest man in California in 1849, during the Gold Rush. But he didn’t make his money by hitting a mother lode of the precious metal. Instead, he made his mint by selling picks and shovels to prospectors. Now fast forward 150 years or so…Today, the modern versions of Mr. Brannan look set to make quite a bit of money too. Mining and oil companies are boosting their capital spending tremendously. And that’s sure to give a boost to the businesses that service them… and to those businesses’ shareholders.Get Ready for the Mining Investment BoomMining companies around the globe are ready to boost their capital spending this year to record levels. They haven’t felt so optimistic in two years. In 2009 and 2010, they slashed expenses to preserve cash and guard against the economic crisis. Naturally, that hurt the service companies they otherwise would have relied on. Global mining companies expect to increase exploration and mine expansion investments to US$115 billion to US$120 billion in 2011. The last time it came close was in 2008, at US$110 billion. And in the 15 years before the commodities super-cycle began in 2003, mining companies spent an average total less than US$40 billion a year on capital expenditures. So these 2011 figures are a very big deal.Mike Sutherlin, CEO of Joy Global (Nasdaq: JOYG ), sums up industry optimism: “We are entering the earlier stages of another multi-year expansion of the industry.” The main beneficiaries of this spending boom include manufacturers of earth-moving equipment such as excavators and trucks, and underground equipment such as drillers. That gives Caterpillar (NYSE: CAT ), Komatsu ADR (PINK: KMTUY ), Sandvik ADR (PINK: SDVKY ) and Atlas Copco ADR (PINK: ATLCY ) good reason to smile this year.The Oil Services Industry Gears UpThe oil services industry is also gearing up for big business too. Oil and gas companies are boosting capital expenditure plans after a prolonged period of steady to higher prices. Not that long ago, they struggled, as global consumers cut down their energy use. But now they seem on the cusp of a rebound. Even unrelated companies seem to think so.The General Electric (NYSE: GE ) buyout of British oil service firm Wellstream shows a renewed confidence in the sector. Sure, the last 18 months have produced relatively lackluster investments. But the industry expects a 10-15% increase in capital expenditure this year. Very large oil companies are leading that rebound. Chevron (NYSE: CVX ), for instance, boosted its capital spending target this year to US$26 billion. That marks a US$4.4 billion increase from 2010 and a record budgeted amount in this area.The world’s six largest, non-state owned oil companies are expected to spend a record US$128 billion on capital investment in the next 12 months. That list consists of: Chevron, ExxonMobil (NYSE: XOM ), ConocoPhillips (NYSE: COP ), Total ADR (NYSE: TOT ), Royal Dutch Shell ADR (NYSE: RDS.A ) and BP ADR (NYSE: BP ). So says Jason Kenny, an oil and gas analyst at ING. His prediction compares to a forecasted US$117.35 billion in 2010 and well over the 2008 record of US$127 billion.The next few years should prove particularly profitable for offshore exploration activity. After all, most of the new reserves lie offshore, especially in deep waters. And Rebecca Fitz, senior manager of the Upstream and Gas Group at the energy consultancy, PFC, says, “In 2014, about 63% of the majors’ new source production is forecast to come from the offshore, shallow water and deepwater.”Investors can best play this trend by purchasing SPDR S&P Oil & Gas Equipment and Services (NYSE: XES ). This ETF is well balanced, with a portfolio almost evenly divided among the 26 holdings.Good Times Ahead for the Mining Services and Oil Services SectorsInvestors should note the similarity between the mining services and oil services sectors. From 2003 to 2008, these sectors enjoyed the commodities super-cycle built on increasing demand from emerging economies. But the global financial crisis derailed all of that. But now that trend has begun anew. Many mining and oil services business are enjoying a “re-rating” too, as investors finally become aware of the upswing in spending. They’re now pricing in the likely upside. Barring another global financial crisis, the good times don’t look likely to end anytime soon either. So any short-term price weakness should be viewed as a buying opportunity.Good investing,Tony D’AltorioReprinted with permission of the publisher. The above story can be read on the website www.investmentU.com. The direct link is: http://www.investmentu.com/2011/February/the-resource-sector.htmlNothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.Views expressed are not FNArena's (see our disclaimer).FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.

By Greg PeelThe Dow rose 148 points or 1.3% to 12,040, the S&P rose 21 points or 1.7% to 1307, and the Nasdaq jumped 1.9%.They're only numbers, just like any other numbers, but round numbers serve as benchmarks and as such become psychological levels. Last night the Dow closed above 12,000 for the first time since June 2008 and likewise the more realistic S&P 500 claimed the 1300 mark.Had there been turmoil in Egypt overnight these peaks would probably not have been conquered, but the “million man march” in Cairo was peaceful, the army did not respond, and as I write we await fresh word from President Mubarak on his plans. Such scenes, including globally recognisable V signs being made by protesters to television cameras, gave global markets confidence overnight to concentrate on economic matters elsewhere. And at the forefront were global manufacturing sector data.Around the grounds, Australia's manufacturing purchasing managers' index (PMI) rose to 46.7 in January from 46.3 in December, China's to 54.5 (54.4), the UK's to 62.0 (58.7), the eurozone's to 57.3 (57.1) and in the US to 60.8 (58.5).The Chinese number here is the independent report provided by HSBC. Beijing's official number saw a fall to 53.9 from 54.9 to probably suggest monetary policy is working. The numbers aren't different enough to quibble too much about.The stand-out in the figures are the very strong results from the “developed” world. These numbers represent rates of growth, with 50.0 being flat growth. The US number was a shock and is the highest since 2004. The UK number is even higher, and that economy is suffering from strict austerity measures. China's growth, on the other hand, is now slower than The West. Australia's sector is not big enough to be globally important, but domestically ongoing contraction is simply another reason the RBA will stay on hold for some time. And from the monetary policy perspective, we can see which side of the world is stimulating with easy policy and which side is tightening the reins.US new vehicle sales jumped 18% in January, led by GM and Chrysler which both had to be bailed out in 2008. December construction spending nevertheless fell by 2.5% when a 0.1% gain was expected. That's a big drop, and the second consecutive month of falls. Is America spending in the right places?Across the globe, the current fear is one of inflation. Such manufacturing numbers only fuel this fire, as do oil prices over US$100/bbl (Brent, Tapis). The Fed is still fighting deflation with QE2 however and is expected to be the last central bank to raise rates. Hence last night European currencies forged ahead, the US dollar index fell by 1% to 77.00, and the Aussie jumped 1.5% to US$1.0121.The Aussie's rise was assisted by the RBA's statement which suggested flood impact on GDP would only be temporary.On a weaker greenback, gold gained US$9.80 to US$1340.90/oz. WTI oil eased however given relative peace in Egypt, falling US$1.42 to US$90.77/bbl. Copper nevertheless powered on to a new record above the US$4.50/lb mark on a 2% rise, with the rest of the base metals mostly stronger as well.The benchmark US ten-year bond yield has been relatively steady of late, closing last night at 3.44%. It is the thirty-year yield which has been on a run, reflecting a stronger US economy and inflation pressures. The Fed's buying mostly tens and shorter, although it has snuck in a few thirties as well.The SPI Overnight gained 42 points or 0.9%.The breaking news is that Mubarak has agreed not contest the September election, but he provided no suggestion of stepping down earlier – as in right now. This will not please the Egyptian people.Today begins celebrations for the Chinese New Year of the Rabbit. Chinese markets will be closed until Monday.Kung Hei Fat Choy! [Note: All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.]FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.

The country’s mining state, Perth, reported the highest decline in property prices, dropping by 1.9 percent during the last three months to December to a median $465,000 says an RP Data-Rismark reports.

Wesfarmers released its second-quarter figures for Coles yesterday, reporting comparable food and liquor store sales growth of 6.6% in Q2, and food and liquor sales of $7 billion - a 6.7% increase on Q2 last year.The company's Q2 results for last year included sales figures for the 22 Coles supermarkets which have now been transferred to Foodworks,

Brisbane government plans to put together a 30 Day Flood Taskforce that will assess the damages from the flooding and make the appropriate recommendations.

Retailers are saluting the Reserve Bank of Australia’s decision to keep the cash rate stable, as the early part of 2011 continues the ‘challenging’ theme of 2010 for the sector.

Australian national carrier Qantas Airrways Ltd (ASX: QAN) has provided additional flights and capacity out of Cairns and Townsville on Tuesday evening ahead of expected extreme weather conditions resulting from Tropical Cyclone Yasi.

Telecommunications giant Telstra (ASX: TLS) has activated its cyclone disaster plan for northern Queensland ahead of the coastal crossing of Cyclone Yasi.

Leighton Holdings Ltd (ASX: LEI) says its Thiess Sedgman joint venture has been awarded a $145 million contract to expand the Coal Handling and Preparation Plant at Lake Vermont coal mine near Dysart in central Queensland.

Existing Australian infrastructure may not be enough to meet the demands of the resource boom expected to happen soon, according to the new report of Access Economics released on Tuesday.

There was mixed economic data out of the U.S overnight, European markets eased and the North American markets posted slight gains.

Many economists agreed that the Reserve Bank of Australia (RBA) will give weight on the firm movement shown by inflation levels so far and the short term impact of the flooding disaster to the national economy.

First time homebuyers take an estimated two years to save up for a property deposit based on research presented by the Real Estate Institute of Queensland (REIQ).

By Greg PeelThe global significance of Energy Resources of Australia's ((ERA)) Ranger uranium mine and its uncertain potential for expansion was driven home last week in the spot uranium market. ERA announced it would have to close its processing plant for three months and the spot price responded with a US$3 jump to US$72/lb.This is the first time the price has been over US$70 since 2008 and reflects a backing off in price from sellers in the market, according to industry consultant TradeTech, and a simple backing out of the market by many as well.The irony for ERA is of course that while losing from lost production it wins from higher uranium prices on new contracts. The twist is the company will need to make up the shortfall on existing obligations and that has the spot market expecting to see ERA in as a reluctant buyer. Management has suggested current inventories will cover that shortfall, but the sellers are not taking the risk.Spot supply was already thin ahead of Australia's wet weather, Tradetech notes, which has been reflected in the uranium price's steady rise. Now it's even thinner. Six transactions totalling 1.2mlbs were reported in the market last week and new demand continues to emerge.The term market, which better reflects the longer term contract nature of uranium pricing, is also seeing new demand albeit the mid-term price indicator remains steady at US$64/lb and the long term at US$67/lb.Experience from 2007 suggests these term prices can stay fairly stable even if the spot price decides to again run amok.FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.Subscribers and trialists should read our terms and conditions, available on the website.All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.

House prices in Sydney and Melbourne posted the highest gains in Australia for 2010 according to data from RP Data/Rismark.

Total estimated estimated insurable value of losses arising from the Queensland floods has hit $1.51 billion, the Insurance Council of Australia said.

US personal income rose 0.4pct in December with spending up 0.7pct.

After developing events in Egypt over the weekend, the Aussie opened on the back foot Monday morning and despite a brief fall towards key levels near 0.9850 the little battler was not to be deterred by offshore events.