MARKETS

U.S. stocks rose slightly Friday, contributing to the market's biggest weekly gain in two months, as strong earnings boosted the technology sector and traders largely chalked up a disappointing January jobs report to stormy weather.

The Aussie rallied half-a-US-cent during local trade on Friday hitting a high of 1.0199 after The Reserve Bank of Australia (RBA) signalled in its quarterly monetary policy statement that further rate rises are on the cards.

S non-farm payrolls (employment) rose by just 36,000 in January. While the report was well short of expectations of job gains near 148,000, weakness was attributed to harsh snow storms in the month.

The Aussie market finished higher for the third straight day today with the All Ordinaries index (XAO) rising 0.8 pct or 39.5 pts to 4958.8.

Gaming company Tabcorp Holdings has posted half-year net profit up 2.9% on the first half of 2009-10.Tabcorp told the ASX yesterday that net profit in the six months to December 31 was $265.5 million, up from $257.9 million in the prior corresponding half year.Revenue was $2.2576 billion, up 3.5% from $2.1807 billion.Tabcorp declared an interim dividend of 24c per share fully franked.Tabcorp said its normalised net profit for the half year was $272 million, up 3% on the prior corresponding half.Normalised earnings per share were 42.6c, down 2.1%, following a capital raising, the company said.Investors looked at the figures and liked what they saw, sending the shares up 3%, or 21c, to $7.11.Tabcorp chief executive officer Elmer Funke Kupper said that each of the company's three operating divisions was forecasting an improvement in revenue and earnings performance in the second half of the financial year.The company said the floods cost it $10 million in lost revenue in January."The recent floods put some uncertainty in the immediate outlook for consumer spending in Queensland," Mr Funke Kupper said."Nevertheless, we are expecting to see positive underlying growth in the second half of the year."This gives us confidence that we are on the right path with our investment programs," he said.Tabcorp said the result was boosted by tax credits totalling $9 million, after credits of $16 million in the prior corresponding half year.Normalised net revenue was $2262.9 million, up 3.3%.All three business divisions achieved positive revenue growth, with the strongest growth recorded in Casinos, Tabcorp said.Casinos: EBITDA $201.0 million, up 5.2%. EBIT $153.9 million, up 4.1%. Casino expenses grew by 5.8%.EBITDA at Star City in New South Wales increased 4.1%. Revenues were up 6.5% as the business expanded its product offering and opened new gaming areas on the Main Gaming Floor.The three Queensland properties showed a recovery in performance following a difficult year in 2010. Revenues increased 4.7% and EBITDA grew by 7.0%. All main lines of business showed positive revenue growth.Wagering: EBITDA $187.7 million, up 3.5%. EBIT $151.9 million, up 3.0%. Wagering revenues were up 2.1%. Variable contribution grew by 3.1%. Expenses increased by 2.6%. They continue to be well controlled, with investments in expansion initiatives offset by savings in other areas.Gaming: EBITDA $172.6 million, up 3.0%. EBIT $148.4 million, up 2.3%. Expenses were up 4.6%, driven by costs associated with the investment in the Casinos business. Expenses continued to be well controlled in the Wagering and Gaming divisions.Tabcorp chairman John Story described the result as "sound"."It was pleasing that all three operating divisions recorded positive revenue and earnings growth," Mr Story said."During the half, the company announced further investments in its Queensland casinos and in Wagering. Each of the divisions now has attractive growth programs in place."In October 2010, Tabcorp announced that it would pursue a demerger of its Casinos business from its Wagering, Gaming and Keno businesses. The work to implement the proposed demerger is underway and the target date remains 30 June 2011."The work to implement the proposed demerger is underway and the target date remains 30 June 2011," Mr Story said.Tabcorp said it planned to have a scheme booklet available during April 2011, and to hold an Extraordinary General Meeting in late May or early June to allow shareholders to vote on the demerger proposal.Tabcorp said the recent Queensland floods had affected trading at its Treasury Hotel and Casino in Brisbane, with "a significant downturn in visitation'' during the floods and immediately afterwards."Tabcorp estimates that the immediate revenue impact of the January floods and wet weather was approximately $10 million."Despite the impact from the floods, normalised group revenues grew 2.5 per cent in January 2011 indicating good underlying growth,'' the company said.Tabcorp said its other casino properties experienced minimal impact and continued to operate normally, with Jupiters on the Gold Coast and Star City continuing with the momentum experienced in the first half."The Wagering business was also impacted by the wet weather across Queensland, NSW and Victoria with an increase in the number of abandoned races."

The Australian sharemarket is gaining at lunch and is edging its way closer to the key 5000 pt mark, a level it has not traded above for an extended period of time since 2008.

The AUD has opened almost half a US centhigher today, supported by high commodity prices.Despite rising tensions in Egypt and the ECB leaving itsrates unchanged in Europe the AUD held onto its recentgains, performing extremely well in mixed overnight trade.

The Australian Dollar has jumped from yesterday's open of 1.0070/80 to highs near 1.0160 after a volatile offshore session.

U.S. stocks drifted just below the flatline Thursday as investors eyed encouraging earnings and stronger January sales among retailers, with a backdrop of continued unrest in Egypt.

US ICSC comparable chain store sales rose by 4.8pct in January from a year earlier. Apparel, wholesale and luxury sales all recorded healthy gains.

By Greg PeelThe Dow gained 20 points or 0.2% while the S&P added 0.2% to 1307 and the Nasdaq also added 0.2%.Australia's December trade balance surprised economists yesterday by recording a similar surplus to November of about $2bn. Expectations were for $1.6bn. The result gave the Aussie another kicker given, all things being equal, a strong surplus implies pressure on the RBA to raise. However, it will no doubt be a different tale in January when weather impacts really start to make their mark.As we contemplate the effects of lost exports, both resource and agricultural, and lost tourism which is also an “export”, we note the service sector in January was even more dour than the manufacturing sector. The manufacturing sector managed to slightly slow its rate of contraction but service sector contraction picked up pace with the PMI dropping to 45.5 from 46.4 in December.China does not separate out a construction sector number but rather notes manufacturing (55% of the economy) and non-manufacturing (45%). The non-manufacturing PMI slipped to 56.4 in January from 56.5 on Beijing's numbers. Meanwhile the UK service PMI surged to 54.5 (49.7), the eurozone's ticked up to 55.9 (54.2) and the US came in with 59.4 (57.1). That's the best US result since 2005, and services represent over 70% of the US economy.Again we see the “old world” forging ahead as the “new world” eases back. The UK results have been no less than astonishing.Wall Street nevertheless opened weaker last night, spooked by a weak result from Dow component Merck and ongoing uncertainty in Egypt and despite the positive service PMI and surprisingly healthy chain store sales for a snowbound January. But then along came Uncle Ben.The Fed conceded late last year that perhaps it was time to address its longstanding policy of aloof detachment – one which sees the issue of official statements and minutes, appearances before government and financial industry groups, and not much else. Taking a leaf out of the ECB's book, the Fed has decided it's time to open up to “the people”, and as such last night Ben Bernanke participated in a “meet the press” session which to date has been a very rare thing indeed.Unsurprisingly, Bernanke was hammered with questions about QE2 but clearly he needed only to point to the improving US recovery for justification. Indeed, Uncle Ben suggested the US economy was running even better than hoped, and despite recent data supporting that view and despite stock prices quantifying that view Wall Street took this as good news and the market turned around.The indices moved into the black in the last hour ahead of tonight's all important monthly jobs data. Economists are looking for 145,000 new jobs to be added.The strong US services PMI and talk from Uncle Ben helped to push the US dollar index higher, up 0.8% to 77.75. The Aussie nevertheless marched to its own tune of strong surplus and added 0.7 of a cent from 24 hours ago to US$1.0160. Gold suddenly decided last night that yes, the Middle East is a worry and yes, perhaps some safe haven investment might be sensible. It rose US$18.20 to US$1354.50/oz.Oil is playing an uncertain game around this US$90 level in WTI, and last night fell back US16c to US$90.71/bbl. The WTI is no doubt being affected psychologically by the other “big” oil contract – Brent – which is wondering whether or not to push on above US$100/bbl. It was a steady night for base metals in London.Strength in the US dollar was also assisted by last night's ECB monthly monetary policy decision. The central bank left its rate on hold at 1.0% and Jean-Claude Trichet talked down current inflation pressures much to the surprise of economists. It will be a watch and wait game in the eurozone.The SPI Overnight rose 13 points or 0.3%.Rudi will be a guest on BoardRoomRadio's Friday Afternoon Round Table this afternoon which will be available for live video streaming from 3pm and for download from 4pm. [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.

Australia's sugarcane crop has suffered devastation as farmers venture out to survey their properties in the wake of category five Cyclone Yasi, whose destructive eye broke land at Mission Beach and passed over Tully, inland bound, last night.Crops have been devastated in Yasi’s wake, the hardest hit being sugarcane – with initial loss estimates at around $500 million for the industry alone. A sugar-growing heartland, sugarcane growers in north Queensland will again bear the brunt of losses,...

The Australian Banana Grower's Council today warned consumers that the Australian banana industry, which escaped flood damage, had suffered devastation as a result of tropical cyclone Yasi.Banana growers across Far North Queensland, in particular Innisfail and Tully, have been the worst affected by the cyclone, according to ABGC Chairman Cameron MacKay.

By Greg PeelAustralia's ASX 200 ended 2009 on 4870 and ended 2010 on 4745 for a loss of 0.2%. By contrast, the US S&P 500 ended 2009 on 1115 and 2010 on 1257 for a 13% gain. Now, remind us again – which is the country that weathered the GFC storm and is hellbent on being in budget surplus in a couple of years, and which is the country that spent half of 2010 fretting over a double dip and is so up to its neck in debt there is never any real intention of seeing a return to budget surplus?A certain amount of explanation can be found in the comparable movements of the previous year. The ASX 200 gained 31% in 2009 while the S&P 500 saw only 23%. The Australian result reflected, as it should, forward earnings forecasts which at the time were optimistically representative of a substantial “V” bounce. Those forecasts were later pared back, most notably around the middle of last year. US earnings forecasts on the other hand just kept shifting up from low bases, and then along came QE2 to add that extra bit of spice.Aside from some substantially wrong calls from stock analysts in the earlier part of 2010 (business credit demand would bounce and soar, retail spending would quickly bounce back to pre-crisis frenzy levels, for example) a major swing factor has been the Aussie dollar – the plaything of foreign hedge funds and a proxy for China. Remember that if a US hedge fund buys BHP and the stock price rises, if the Aussie rises as well that hedge fund wins twice. Vice versa on the downside. BHP jumped in 2009 as the commodity price bounce was priced in, then sat largely steady for most of last year. The Aussie ran from US60c at its nadir to parity. From a US point of view, BHP in Aussie dollars currently represents little upside and a screaming void of a downside were anything to go substantially wrong in the world again (European debt, for example) or if Beijing accidentally brought China in for a hard landing.In the year to September 2009, notes Deutsche Bank, foreign investors injected US$60bn into Australian equities representing 5.6% of total market cap and reached about a 40% holding. In the same period 2010, they withdrew US$2.5bn.The question now is: what will the year 2011 bring?Deutsche notes that while 2010 saw a slight net withdrawal, foreign flows into Australian equities were nevertheless positive in the September quarter and have again been positive in the December quarter. Has the tide turned? Deutsche believes it has. Indeed, Deutsche is forecasting a 15% rise in the ASX 200 over calendar 2011.Deutsche believes the earnings downgrade cycle in Australia should now have ended (notwithstanding immediate weather impacts). Listed companies missed the bulk of the government stimulus provided since 2009 (small builders were winners for example, retail had an initial spurt from hand-outs but then consumer demand fell away except for larger items like cars). Mining companies have been making grand expansion and general spending plans since 2009 but the mining tax debate meant a lot of those projects were stalled. While the mining tax issue is not yet fully resolved, resource companies should feel sufficiently confident to roll out the capex this year given commodity price rises at the very least.The mining tax issue was clearly another reason why foreign investors backed out of Australia in 2010, or stopped buying, as was the general uncertainty caused by political turmoil.Australian direct equity investors are remaining shy post-GFC. The popularity of self-managed super has risen dramatically but funds have found their way into cash deposits and other yield instruments rather than risk stocks. But households in general are still making what Deutsche suggests are “substantial” contributions to superannuation funds both at the mandatory and discretionary levels.Australia's underperformance is also a reflection of Australia's two-speed economy. The resource sector may have been booming, mostly at the smaller cap level, but this has been offset by disappointment, some might even say recession, elsewhere. The retail sector is the obvious example. Can the resource sector continue to boom?With a thinly veiled air of world-weariness, Goldman Sachs has once again increased its shorter term commodity price forecasts. “Another year and another round of upgrades,” notes GS in a report this week. Short term price forecasts are now more than double long term forecasts, the analysts note, for both iron ore and copper. For the majors, such prices represent substantial short term cashflow. BHP Billiton ((BHP)) derives 37% of earnings from iron ore and 24% from copper (2011 forward basis) and Rio Tinto ((RIO)) 80% and 15% respectively.Coking coal (used in steel production) is the big mover although it has not yet reached double short/long pricing. GS sees more upside for coal than iron ore given the swing factor of Indian demand. India has no coal; China is quite well supplied albeit is now a net importer. Oil, aluminium and nickel forecasts are less divergent on the short/long basis.BHP, Rio, and counterparts across the globe are all in the process of significant iron ore production expansions. Global supply was 1006mt in 2010 but GS sees potentially 1675mt by 2015. This would require all projects to get up and without too much delay, which is not likely, but either way GS sees a tipping point for iron ore not too far ahead with a possibly very sharp price reversal before 2015 as Chinese steel production matures.Goldmans' advice to resource majors is to return capital to shareholders rather than look to undergo even further capacity expansions. What will Marius come up with at the upcoming result announcement?On the assumption of reverting iron ore prices, Fortescue Metals ((FMG)) has a window of opportunity to meet expansion goals before its too late. GS analysts support the company's expansion goal to 155mtpa as long as time and funding costs go in FMG's favour.For coal stocks, on the other hand, the story will keep on running in Goldmans' view.But just how much of this shorter term commodity upside is already built into share prices?UBS analysts believe commodity prices will remain “resilient” in 2011 but resource sector stock prices look a bit overheated in their view. In early December, on this basis, UBS trimmed its Overweight ratio for the resource sector in its model portfolio from 5.5% to 2.0%. This week, UBS has actually downgraded its resource rating to Neutral. Small cap valuations seem particularly stretched, the analysts suggest.The flipside was that UBS upgraded Australia's banking sector rating to Neutral from Underweight in December, but Neutral it will stay until there are signs of more positive credit demand growth. UBS remains Overweight industrials and Underweight REITs.UBS has also shuffled the stocks in its model portfolio, adding Graincorp ((GNC)), Myer ((MYR)), Origin Energy ((ORG)) and Transurban ((TCL)). It has removed AGL Energy ((AGK)), Bradken ((BKN)), Gloucester Coal ((GCL)), Harvey Norman ((HVN)) and ResMed ((RMD)).BA-Merrill Lynch has looked to global factors in reassessing its own model portfolio. Merrills sees the US economy shifting into a “Phase II” of recovery in which unemployment will begin to ease. As the US recovery broadens, lingering GFC shock and more recent sovereign debt concerns will also start to ease, the analysts suggest, and prices will react accordingly. Financials and energy stocks are Merrills' stand-outs on this assumption.From the Australian perspective, Merrills sees a wider benefit of a Phase II US recovery than just for those stocks with direct US exposure. Easing fears should see Australian retail investors begin to rebuild those portfolios which for so long have been biased to cash. With regard to financial sector beneficiaries, Merrills sees better value outside of the Big Four banks with asset managers such as AMP ((AMP)) and Challenger Financial ((CGF)) favoured, along with small banks such as Bendigo & Adelaide ((BEN)) and investment banks such as Macquarie ((MQG)) (is there another one?).While the oil price has run higher, it has underperformed those of bulk commodities despite oil being a closer proxy for global GDP. Merrill's thus likes the energy sector, and Woodside ((WPL)) in particular.Summing up, Merrills has Macquarie, Bendigo and Challenger as the major “overweights” in its model portfolio, along with QBE Insurance ((QBE)), as well as Woodside and WorleyParsons ((WOR)) in the energy space. Merrills is also is favour of the consumer sectors in 2011, and as such Wesfarmers ((WES)), JB Hi-Fi ((JBH)) and David Jones ((DJS)) are also overweights.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 sharemarket is slightly stronger after almost three hours of trade with the All Ordinaries index (XAO) up 0.29 pct or 14.1 pts to 4910.9.

FNArena has added another video to its Investors Education section on the website.ATW's Jerry Simmons explains how a technical based set-up before opening of markets can give daytraders an edge. In this video Simmons uses crude oil and gold as examples. Total duration 44 minutes.SummaryThis is an educational video in which Jerry Simmons, Lead Mentor and Co-Founder of the Advanced Trading Workshop, Inc. explains how each morning at about 6 am ET, 3.5 hours before the markets open, those markets are highlighted where most of the price action is expected to be that day; their structure is analysed and setups are highlighted that will develop if clearly defined conditions are met. He uses two of three markets prioritised that morning, namely Crude Oil and Gold, as examples.CommentsCrude OilAt about 6 am ET Crude Oil Futures were trading at about $85.80/barrel. During that pre-market analysis online, a confirmed break-out above $86.50 was stated, in the written “Markets of Interest” notes, to be a confirmed reversal off a local Double Bottom, likely to result in a sustained move up. The confirmed break-out above $86.50 happened at about 9 am; prices then rapidly moved up to $89.73 at about 11:15 am, a move of $3.23/barrel or $3,230 per 1000 barrel contract.GoldThe pre-market analysis at about 6 am that day analysed gold to be forming a major Double Bottom and a local inverse Head & Shoulders pattern. Any break-out below $1,320 was stated to invalidate the bullish setup. The upside target was calculated to be at the 1,385 – 1,395 level. The reversal confirmation point was stated, in writing in the “Markets of Interest” notes, to be $1,350-1,355. An entry at say $1355, a completion target at say $1395 and a stop at $1350 would result in a $40 reward and a $10 risk, i.e. a very good 4:1 reward to risk ratio. A move of $40 an ounce results in a profit of US$4,000 per 100 oz contract.To view the ATW Strategic Prep Video (originally from November 29, 2010) titled "Review CL n GC" click HERE or visit the FNArena Investors Education section of the website.Here's the direct link: http://www.fnarena.com/index2.cfm?type=dsp_front_videosAll views expressed are Jerry Simmons's, not FNArena's (see our disclaimer).Jerry Simmons has over 25 years of full-time trading experience. He is the senior partner and head mentor for the “Masters” Programme within the education system at New York based Advanced Trading Workshop (ATW). ATW recently set up shop in Australia through the establishment of ATW Australia (since mid-2010).FNArena is pleased to have Jerry Simmons as a highly valued contributor to its service which aims at both educating investors and assisting them with their own market analyses.The above mentioned videos can be accessed via the FNArena Investor Education section at http://www.fnarena.com/index2.cfm?type=dsp_minc_education)About ATW AustraliaFounded in June 2010, ATW Australia is a “one-stop-shop for all a trader needs to succeed”: quality education for new traders, superb advanced trading education, fast unfiltered data, a world-leading trading platform, customer oriented competitive brokerage, quality ‘Made in the USA’ specialized trading computers, trading magazines, and the all-important psychological mentoring and coaching for traders. The trading educational products are provided by the Advanced Trading Workshop, Inc. in New York, all other services are provided by a network of partners that were chosen based on their superior products and services in their specific field of expertise. FNArena is one such partner.To learn more visit www.advancedtradingworkshop.com.au.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 Chris ShawAustralian REITs outperformed strongly in January, delivering a total return of 2.4% against an overall market return for the month of just 0.2%. According to JP Morgan, the lack of specific news in the sector implies much of the outperformance is likely explained by a lowering of the shorter end of the interest rate curve.JP Morgan sees this as a reflection of the market adjusting its interest rate assumptions, as the Queensland floods and the associated levy mean timing expectations for any further rate hikes have been pushed out.In sector terms JP Morgan notes Office and Retail were the best performers for January, the former driven by favourable office data in the Sydney CBD market. Relative underperformance was delivered by the Diversified and Industrial sectors.Looking beyond January, Macquarie expects the fact many REITs continue to trade at a significant discount to the broker's valuation and to net tangible asset backing means capital management is increasingly likely to become a point of focus in 2011.What supports this theory according to Macquarie is an improvement in the overall credit environment , the fact REITs generally have excess capital available and many are not highly leveraged at present. The process may have already started given Charter Hall Retail ((CQR)) has recently announced a share buyback of $20 million worth of units.Elsewhere in the sector, Macquarie suggests the metrics in support of some sort of capital management appear very favourable for ING Office ((IOF)), Stockland ((SGP)), Dexus ((DXS)), Charter Hall Office ((CQO)) and Commonwealth Property Office ((CPA)). Another positive identified by Macquarie is the potential for capital management initiatives to deliver an improvement in the sector outlook over the course of 2011, as debt restructuring including the reduction of costly excess liquidity implies some potential earnings upside.As well, Macquarie notes a moderate increase in distribution payout ratios would still leave the sector in a cash neutral position this year and a cash positive position in FY12 based on the broker's estimates, so making such moves more likely.There is also scope 2011 turns into a below average year with respect to equity raisings in the sector, this as companies continue to reposition their portfolios and given a lack of acquisition opportunities. Add in cash being received from asset sales and Macquarie suggests the usual capital raising drag on the REIT sector may be somewhat less than in recent years.To reflect this, Macquarie is forecasting a total shareholder return for the Australian REIT sector for 2011 of around 13%, a return the broker views as attractive given the relatively low risk profile of the sector.The Sydney and Melbourne office sectors have a positive outlook this year according to Macquarie, with rental and yield data already offering evidence a recovery has begun. As well, the broker's forecasts for the Perth office market have been increased given an increase in net absorption rates. In contrast, a further recovery in the industrial market is not expected until 2012.Leading into the December half results season this month, Macquarie suggests there should not be too many surprises. The key risk relates to outlook comments for FY11 from residential developers, particularly as a result of recent bad weather and the floods experienced in Queensland.Within the sector Macquarie's key Outperform ratings are given to CFS Retail Property ((CFX)), Charter Hall ((CHC)), Dexus and GPT ((GPT)). Macquarie also sees strong value in Westfield Retail ((WRT)), estimating a total shareholder return for the stock of around 16% given a target price of $2.90. Leading into their respective results, Macquarie's key Underperform ratings are given to Stockland and Australand Property ((ALZ)).An appreciating Australian dollar has negative near-term implications for the NTA (Net Tangible Asset) of companies with equity invested offshore. For Macquarie this implies NTA falls for Charter Hall Office and Charter Hall Retail, ING Office, ED Retail ((EDT)) and Westfield Group ((WDC)), but evidence of a recovery in the US economy is a positive for Westfield Group, Dexus, Charter Hall Office and EDT Retail over the medium-term.BA Merrill Lynch has also looked at the REIT sector, but from a perspective of how big a threat online shopping is to margins in the retail sector and for owners of retail shopping centres. The analysis is timely given Australian industry figures suggest online sales may account for between 3-7% of total retail sales.Taking a long-term view, BA-ML suggests the types of goods likely to do well in an online environment are those of relatively high value that are easy to ship such as books, CDs, DVDs and small electrical items, and specialised niche items that cannot justify a dedicated retail store presence. Other categories such as food and staples appear more protected, as do large ticket items and fashion goods. On the broker's estimates, the growth in online sales could cost Australian retailers about 1% annually in sales growth terms. As well, in BA-ML's view the very high returns on equity and margins for the Australian retailers have and will continue to come under pressure as the internet increases competition and removes some barriers to entry.Even allowing for this, the broker expects Grade A malls will continue to enjoy gains in sales volumes. In FY11 BA-ML expects mall rental growth of 3% for the major Australian REITs, with almost nil vacancies to be reported in February. Given a relatively robust Australian economy and a recovering US consumer environment, BA-ML continues to prefer retail REITs in comparison to the office sector. In order of preference, BA-ML rates CFS Retail, Charter Hall Retail, Stockland and Westfield Group as Buy, while Westfield Retail is rated as Neutral.The broker's forecasts suggest a total return for the Australian REIT sector of 10-12% in 2011, which is below BA-ML's forecast for a 20% total return from the broader Australian equity market.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 bullish sentiment surrounding the AUDover recent days took a bit of a hit overnight as investorsmoved to a "risk off" mentality.

The Dow Jones Industrial Average struggled towards a fifth gain in six sessions, as investors moved cautiously following a strong run up and a fresh wave of uncertainty in Egypt.

The US ADP private sector employment report supported the view that the US economy was picking up steam.

After reaching almost monthly highs yesterday, the Australian Dollar has fallen back as a result of both local and international pressures.

By Greg PeelThe Dow rose one point while the S&P fell 0.3% to 1304 and the Nasdaq was steady.The big news last night of course is that it was Groundhog Day in the US. Punxsutawney Phil emerged from his burrow but did not see his shadow, meaning spring will be early this year. That's goods news for Americans currently suffering a Big Freeze which is providing a counterpoint to Australia's Big Sauna (at least in Sydney).The big news last night of course is that it was Groundhog Day in the US. Punxsutawney Phil emerged from his burrow but did not see his shadow, meaning spring will be early this year. That's goods news for Americans currently suffering a Big Freeze which is providing a counterpoint to Australia's Big Sauna (at least in Sydney).Cyclone Yasi crossed the Queensland north coast at midnight last night at Mission Beach between Cairns and Townsville with all the ferocity predicted, albeit its strength was downgraded from Category 5 to 3 at the crucial time. I'm not sure what it is Queenslanders have done in recent times but someone's obviously upset. All the best to everyone in FNQ. Having reached the 12,000/1,300 marks Wall Street was ready to take a breather last night. As I assumed in this Report yesterday, Egyptians were not happy with President Mubarak's announcement he would not step down until the September elections. What was a peaceful protest on Tuesday turned ugly last night as the people vented their anger. Meanwhile, the King of Jordan sacked his government in response to the same popular movement. The entire region is at a flashpoint and the result could go either way. It has also occurred to me that Libya, which sits between Tunisia and Egypt, has been awfully quiet.Wall Street is currently holding its breath.The data point of significance in the US last night was the ADP private sector employment survey which suggested a better than expected 187,000 jobs were added in January. Egyptian influence aside, any positive response which might have been gleaned from this data was undermined by the adjustment to the December figures. Previously ADP had reported 297,000 new jobs in December but last night that was revised down to 247,000. Hey, what's 50,000 jobs between friends?The official non-farm payrolls data will be released on Friday night. That's usually a guess and giggle as well.On Tuesday the US dollar index fell sharply to reflect the peaceful “million man march” but as Cairo blew up last night, the greenback crept higher once more, up slightly to 77.10. The Aussie slipped a bit to US$1.0087.Gold's playing a funny game at present. One might expect a renewed surge on geopolitical risk but right now gold is largely tracking the dollar (conversely) and it fell US$4.60 last night to US$1336.40/oz. The lack of old-fashioned safe haven-seeking probably reflects the fact the world is loaded up on gold at present.Oil appears also to be waiting to see what happens next, rising only US9c last night to US$90.86/bbl. Copper made a run at US$10,000/lb last night but fell at the last hurdle. All metals retreated in the afternoon in London to close mostly flat.The SPI Overnight rose 4 points.Today in Australia sees the all important monthly trade balance data along with building approvals. Today is also service sector PMI day across the globe, kicking off locally.Today begins the new lunar year so to our Chinese friends who aren't out partying, again I say Kung Hei Fat Choy. FNArena editor Rudi Filapek-Vandyck will feature on Sky Business's Lunch Money today between 12-1pm and tomorrow he will participate in another video recorded Friday Afternoon Round Table on BoardRoomRadio.[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.

Unrest in Egypt affected market sentiment on Monday as investors predicted the impact of the tensions on neighboring countries and world oil supplies.

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

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.