BUSINESS

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.

The Australian Dollar has regained some lostground overnight as the markets refocussed on economicreports out of the US and other major economies and lessso on developments in Egypt.

U.S. stocks climbed Monday despite ongoing unrest in Egypt as investors took heart in the Suez Canal's continued operation and U.S.

Manufacturing activity had a soft start to 2011 amid weaker domestic demand and a stronger Australian dollar, a survey revealed.

By Greg PeelThe Dow closed up 68 points or 0.6% while the S&P gained 0.8% to 1286 and the Nasdaq rose 0.5%.Well if you'd asked me before my summer break whether the Mediterranean region was an area of focus for financial markets going into 2011, I would have answered yes, definitely, although it would have been the northern shore I was referring too. But Egypt?Hello all. Hope you had a great Christmas and New Year and are looking forward to a positive 2011. It's good to be back. It's certainly been a devastating and tragic January across the country and when I said on my pre-Christmas appearance on Sky Business that no one was paying enough attention to the weather, in terms of risks to Australian economic growth, the subsequent events were not exactly what I had in mind.The Australian market has understandably underperformed Wall Street over the past month while the US economy and, by note of earnings reports, US companies are seemingly firing along. QE2 is working, as well it might. Indeed, this morning Wall Street has closed on a positive January for the first time since 2006. And although it's not a hard and fast rule (2009 was an obvious exception), the old adage is a positive January means a positive year.I agree with suggestions that while the drop on Wall Street on Friday night appeared a direct response to the Egyptian crisis, after a strong run-up the market was due a breather. Funny – “Egyptian crisis” just runs off the tongue like “Greek crisis”, or “Irish crisis”, or “European crisis”. This exact time last year it was Greece which came out of left field. Then, as now, suggestions were made that Greece was an excuse to take profits after a very strong 2009, but then the fear of contagion crept in. And now we're having deja vu as Egypt's turmoil is sparking contagion fears across North Africa and the Middle East. Tunisia has been to Egypt as Dubai was to Greece.But last new year's crisis was all about debt while this one is all about oil. There is no talk of failing banks or rising sovereign bond yields, just talk of the Suez Canal, global oil supply, and the “careful what you wish for” warning that a democratised Middle East may open the door for more widespread hard-line Islamic oppression. It may also open the door for peace-loving Muslims to form moderate and secular governments with nationwide welfare in mind. We can only hope.The result is that last night Wall Street bounced, spurred on largely by a very solid result from Exxon. While this was a fourth quarter result, it serves to draw attention to the current oil price surge. Last night WTI crude gained another US$2.95 to US$92.08/bbl.Have you noticed just how expensive it's become locally to fill up lately? Well that's because Tapis crude is on the wane in availability. Refiners such as Caltex have been forced to import more and more Brent Crude (North Sea) as a substitute, and the spread between Brent and WTI has been rising fast over the past months. Last night Brent closed over US$100/bbl for the first time since the oil price explosion of 2008. (Don't quote me, but I assume the Brent supply comes through the Suez Canal.)Also driving Wall Street last night were solid economic data. The Chicago purchasing managers' index which measures activity in America's largest commodity centre saw a jump to 68.8 from 66.8 last month to mark its highest level in 20 years. This is a 50-neutral index, so 68.8 implies a very rapid rate of growth. The Dallas Fed index released last night nevertheless was unchanged.Personal income rose 0.4% in the US in December and spending 0.7%, which were a bit better than expected. I'll make note here that last week's US fourth quarter GDP result of 3.2%, albeit a tad disappointing for Wall Street, is only the first estimate. It takes the October numbers and extrapolates them across three months. Over those months, the US economy was in an upswing, and hence it is suspect we will see subsequent upward revisions in February and March.Over in Europe, the focus was on the eurozone CPI which rose to 2.4% in January, up from 2.2% in December. The rise in inflation sparked a rally in both the euro and the pound, sending the US dollar index down half a percent to 77.78. The Aussie rose slightly to US$0.9969.The weaker greenback helped base metals along to fairly uniform 2-3% gains in London, and we know what happened to oil. Gold, however, fell back US$6.00 to US$1331.10/oz after Friday's solid geopolitical surge.The SPI Overnight gained 12 points or 0.25%.I left 2010 with a report previewing 2011 which noted that the VIX volatility index had dropped to mid-teens in the US (similar here) and that whenever it does, something always happens. It may not happen immediately but once again this time last year we had a similar scenario. No one predicted Greece, no one predicted Egypt. At teen-level volatility cost, put option insurance is every portfolio's friend.[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.

By Greg PeelThe RBA left us in December with a thinly veiled suggestion it was unlikely to change its policy settings any time soon. At 4.75% on the cash rate, the RBA was happy that this level would suffice for the medium term outlook and that inflation would remain within the 2-3% target zone probably for the rest of the year.On the basis of such language, my opinion and the opinion of many economists was that we would be unlikely to see a rise in the first half of 2011.It might be timely to point out here that the RBA looks at its own measure of core inflation, ex food, energy and other elements, when assessing inflation levels. It does not, I repeat, does not look at the headline inflation number as suggested by the quarterly CPI, the TD Securities independent monthly headline gauge, or any other headline inflation reading. This has been the case since Moses was RBA governor, yet still the popular press will jump at any headline number above 3% as being “above the RBA's target zone”, thus implying rate rise pressure.They are ignorant and wrong. Very ignorant and very wrong.In today's statement, the RBA noted that 2010 core inflation, under its own measure, rose 2.75%. The board reiterated that it expected inflation to remain within the 2-3% zone “over the year ahead” [my emphasis].On that basis, it is hard to see a rate rise even within twelve months, let alone six, albeit twelve months is a long time and the RBA now likes to pro-act, rather than re-act, to inflationary pressures. The strength of global 2010 economic growth was noted in this month's statement, led by China and India, and the pressure of rising costs for food and raw materials was noted. The offset came in the form of Europe and its ongoing debt woes.Domestically, the RBA has again pointed to what it doesn't, but most do, call Australia's “two-speed economy”, with the terms of trade as strong as any time since the fifties while households quietly suffer economic weakness elsewhere.So effectively, no change. Except that it was incumbent upon the RBA to address the economic impact of Australia's flood disaster, which it did at length.The bottom line of the RBA's assessment can be summed up in one word – “temporary”. Prices for commodities (such as food) are rising as a result but then activity in various industries has been set back. Recovery will come at different speeds in different sectors and locations. Infrastructure has been destroyed, and the subsequent rebuilding will add to GDP growth, but not by a lot more than was going to be the case anyway. There will also be a deferral of other previously planned government projects.There will be short term impacts, but not a lot in the way of medium term impact, as far as the pragmatic business of monetary policy setting is concerned.In other words, December's policy statement is still valid in February. No rate rise for a while. Read the full statement here.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 PeelLast night it was revealed in the US that the Chicago area purchasing managers' index (PMI) jumped to 68.8 in December which, given a result of 50 means a neutral rate of growth, is an astonishing result – indeed it was the highest recorded in the 20 years of measurement. Anything above 60 is seen as rapid expansion.This is the US economy we're talking about. The same economy that only six or so months ago was supposedly on the verge of a “double dip”. It just goes to show what a bit of monetary policy tinkering can do which, in the US case, came in the form of QE2. The result bodes well for tonight's release of the nationwide US manufacturing PMI.Today China released its equivalent manufacturing sector PMI which, on the official release, showed a second consecutive easing in growth rate to 52.9 in January from 53.9 in December. It was not a shock result given the Christmas Day interest rate rise from Beijing. A reading of 52.9 suggests China's manufacturing sector is just ticking along nicely on moderate growth – neither threatening a hard landing nor looking like a runaway locomotive.It would seem Beijing's policy measures are working as planned, just as they pretty much did all through 2010 (if we take the “official” numbers as gospel, which we know is folly). It is still likely, nevertheless, that 2011 will see a continuation of the “good news is bad news” and vice versa attitude to Chinese data given any solid results will encourage further tightening from Beijing, and any weak result would suggest the screwdriver will be rested.That aforementioned “folly” comes to the fore when one notes the independent calculation of China's manufacturing PMI conducted by HSBC. That survey saw the equivalent HSBC index rise to 54.5 in January from 54.4 in December – a slight gain and a higher absolute result.HSBC notes a solid rise in new orders in January, albeit below November's peak, which is a forward-looking indicator for GDP.Australia's manufacturing PMI was also released this morning. While the local sector is relatively much less influential within the local economy than that of China or the US given the weight of our now somewhat soggy resources sector, a reading of 46.7 for January provides little encouragement. That's 0.4 better than December, but still below 50 meaning ongoing contraction for several months now with a strong currency and weak local demand to blame. Our services and construction sectors have fared little better.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.

National Australia Bank (ASX: NAB) says its telephone and internet banking services which were interrupted earlier today have now been fully restored and are functioning as normal.

Queensland’s rebuilding efforts will impact government affordable housing schemes that target low and moderate income earners.