BUSINESS

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.

Contracting firm Downer EDI gradually sees the recovery of the market values it lost last week when it admitted last week that cost blowouts of the Waratah train project in New South Wales forced it to absorb losses of up to $250 million.

Initial Victoria figures released today revealed the estimated insurable value of claims arising from the Victorian floods is nearing $70 million.

Origin Energy Ltd (ASX:ORG) has reported record production of 68.2 petajoules equivalent (PJe) and sales revenues of $424 million for the half year to 31 December 2010.

The resources boom missed ERA Ltd in 2010, but geological fate and mother nature didn't.

Australian agriculture looks set for a positive 2011 with agri-commodity prices expected to stay at elevated levels, but the sector must be prepared to manage a number of challenges, including increasing price volatility, according to a new industry report.

As the state tries to recover from the debilitating effects of the flood, renters wanting to move out of a flood damaged commercial area may have a hard time exiting their lease contracts.

Major Australian supermarkets have given consumers some form of relief when bread and milk products sitting on their shelves saw significant reduction on prices but the initiatives appear to have been cancelled out by soaring petrol cost currently in effect.

Murchison Metals Ltd (ASX:MMX) has appointed Wayne Zekulich as chief financial officer of Oakajee Port & Rail (OPR), developer of port and rail infrastructure for the mining industry in Western Australia’s mid-west.

The latest figures for the insurance industry shows that claims numbers and estimated insurable value of losses as a result of the Queensland floods are rising says Insurance Council of Australia (ICA).

Queensland Gas Corporation (QGC) tapped Motorola Solutions to build its $14.4 million digital radio network that will service the communication requirements of the company’s liquefied natural gas (LNG) projects in southern and central Queensland.

Australian consumers are placing major purchases like property, cars and vacations on hold for the year according to results of a survey conducted by mortgage provider Homeloans Ltd.

Rising food prices and the upward trend of inflation levels are the most pressing concerns that the Reserve Bank of Australia (RBA) must weigh in once it reconvenes on Tuesday to determine the cash rate that will be in effect for February.

Optimism among Australian SMEs declined as private business owners assessed the domestic economy for 2011, according to new research.

National Australia Bank (ASX: NAB) has suffered an outage of its Internet and telephone banking systems today, only two months after a computer system glitch delayed the processing of payments and transactions of thousands of customers.

The Australian sharemarket is currently off by 0.9pct or 46pts to 4826.5, off the back of a weak lead out of the U.S markets and Egyptian political unrest.

Coles-operator Wesfarmers Ltd announced on Monday that sales of the retail firm saw spiking numbers in the first six months of the current financial year despite cautious consumer behaviour seen for the most part of the period.

Major investors of giant mining firms BHP Billiton Ltd and Rio Tinto Ltd reportedly asked the two companies to prioritise share buyback schemes for now prior to launching plans of actively pursuing takeover deals.