MARKETS

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.

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

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.

By Steve McDonald, Investment Analyst Host of The Oxford Club’s Market Wake-Up Call Saturday, January 29, 2011Editor’s Note: In this edition of the Investment U Weekend Update, Steve tackles… Food Inflation – and How to Cash in on it… Demand for Silver Coins Goes Crazy… Coming Soon to a Market Near You… a Rally: The Sectors Primed to Run Higher The”Slap in the Face” Award* * * * * * * * * *Food inflation in the United States is up around 3% over the past year – 1.5 times the rate of inflation. What’s more, Andrew Wolf of BBT Capital says a 5% jump is not out of the question and could cause real sticker shock in grocery prices. Already, dairy is up 5.5%, while fruit and vegetable prices have risen by 3.5%.In fact, CNBC did a comparison of costs for five basic foods – meat, dairy, vegetables, bread and consumables – and found that prices have jumped by as much as 22% to 27%, depending on where you live. If you haven’t seen the big moves yet in your local market, it’s because for the most part, stores have been absorbing the costs.What you will notice is that the size of packaged goods will be smaller, while the cost has remained the same. That’s a tricky price increase you’re not supposed to notice, but still a price increase.How to Cash in on Food InflationFood commodity traders Jim Bower (of Bower Trading) and Shawn Hacket (of Hacket Trading) say there’s one food that hasn’t seen the big price increases of wheat and corn: Rice. According to both of them, it will run higher. With current rice production at 30 to 40-year lows, this will add fire to the pricing when demand picks up this year, in order to catch up to the production shortfall.While commenting that grains were the big winners last year, Bower and Hacket also both say to look for cattle, dairy cattle, butter and milk prices to rise in 2011. Also, high grains prices will make farmland costs for planting sky-high. But they say food store stocks are not the best way to play this move. Other ways to profit form this inflation is to use exchange-traded notes (ETNs) and exchange-traded funds (ETFs) that focus on food groups like cattle and hogs, for example. Make sure you research them thoroughly before jumping in.The Silver Coin CrazeNicholas Colas, Convergas’ Chief Market Strategist, says the demand for silver coins has tripled in the last 18 months. Why? Because gold is too expensive for the average guy , in addition to concerns about the dollar and the euro, which are driving people to an alternative currency – silver coins. And silver coins are also a good hedge against inflation.Colas says this is a return the days in the late 1970s when silver ran to around US$52 per ounce. Today, we essentially we have a fixed supply of silver, set against an increasing supply of money, which means the foundation is set for a large price run-up. He likes gold and real estate… if you can afford gold and can wait out the real estate market recovery.Coming to a Market Near You Soon… a Rally!Steve East of Height Analytics says we’re likely to see a market pullback in the next few months, but it will merely be a temporary glitch in what he calls a big run in 2011. His prediction for the S&P 500: 1,500 points – over 20% higher. That forecast is based on corporate profits running at all-time highs, with corporate earnings the only V-shaped recovery in the world.East says the market is currently at about 80% to 83% of its full value, so there’s plenty of room to run. The market multiples have to increase. East likes energy, industrials and materials, all of which have lagged so far.The”Slap in the Face” AwardToday’s award goes to the folks who created the sales and marketing for cell phones. Their effort is a true modern wonder. My current cellphone is about six or seven years old. Many of my younger friends laugh at it, but it works and costs me nothing. It’s fine for me. It has a camera that I’ve never used and it’s always worked, which is more than I can say for other phones I own.But they should see the first cellphone I owned – an absolute monster (picture Gordon Gekko’s in the movie”Wall Street”) and was only six or seven years older than the phone I have now. The advances in technology have been ridiculous, but at the time, it was the cat’s meow!My point is this: I won’t buy a so-called smartphone because as soon as I do, it will be outdated and I’ll still look foolish to younger folks. I still won’t use any more of its amazing applications than I do with this one. I hate the fact that I’m supposed to be available 24/7 on these things and texting just seems redundant. I’m not that interested in knowing what my friends are doing all the time. I don’t care.But the job that the marketing and sales players have done to convince buyers that they must have the newest and best phones has been one of the best I’ve ever seen and my hat is off to Verizon (NYSE: VZ), Apple (Nasdaq: AAPL) and AT&T (NYSE: T). They’ve created a market out of thin air and demand that’s beyond comparison.But I don’t want all this phone technology. I find it excessive. It reminds of what my father asked me when I installed an eight-track tape player under the dash of the car I had in college. He said;”Don’t you have a radio in that thing?” I guess nothing ever really changes.Good investing,Steve McDonaldReprinted with permission of the publisher. The above story can be read on the website www.investmentU.com. The direct link is: LINK]Nothing 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.

Fears over unrest in Egypt sent U.S. stocks reeling Friday to their biggest one-day decline in months and put an end to the market's eight-week win streak, as investors sought safety while oil prices surged.

The US economy grew at a 3.2pct annual pace in the December quarter, short of forecasts tipping 3.7pct growth. US consumer sentiment rose from 72.7 to 74.2 in January.

The Australian Dollar fell back below 99 cents at the start of Asian session on Friday and consolidated around 0.9890 for the remainder of onshore trade.

FNArena has added another video to its Investors Education section on the website.ATW's Jerry Simmons highlights crude oil has landed in a key directional price zone. Breaking out of this zone will determine where prices will move to next. Total duration of this educational video is 43 minutes.SummaryIn this video, Jerry Simmons, Lead Mentor and Co-Founder of the Advanced Trading Workshop, Inc. (“ATW”), New York, analyses the current crude oil market, provides three targets for a possible downside move and three targets for a possible upside move; depending on in which direction the key zone of 87.50 – 88.20 breaks. 30 minutes into the video, Jerry Simmons outlines a possible trade with a sensational 10:1 profit/loss ratio on just 15 ticks risk.CommentsCrude Oil (CL) is re-testing critical support at the $87.50 - $88.20 area. It has been testing and re-testing this area for the past two weeks. If CL breaks this support level, this could foreshadow a more general downturn in the markets in general.However, should CL hold the US$87.50 - US$88.20 area, and should we get a confirmed break-out (B/O) beyond that level, that would significantly increase the chance of a move back up to the US$91 price level and even beyond that to new highs. A B/O to the upside would require the price rising to above US$88.80 by 30 to 40 ticks (“aggressive reversal confirmation”); or US$89.20 - US$89.50 (“primary, or conservative, reversal confirmation”).If the level of US$87.50 - US$88.20 does not hold, then the downside targets are:1. US$84.00 - US$84.502. US$80.00 - US$81.00To view the ATW Strategic Prep Video (originally from November 29, 2010) titled "Analysis CL" click HERE or visit the FNArena Investors Education section of the website.Here's the direct link to the section: 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.

The AMP's Chief economist and strategist, Dr Shane Oliver looks at why Australian shares have been lagging in past year, and whether this under performance will continue.At the end of 2009 there was much optimism Australian shares would continue to outperform their counterparts in other developed countries.In particular Australia had come through the Global Financial Crisis in good shape without the structural constraints facing many other developed countries, the Australian economic outlook looked good and Australia was well keyed into high growth Asia.However Australian shares have disappointed over the last year: returning just 1.6% in 2010 whereas global shares returned 10.4% in local currency terms.Global shares have reached new recovery highs whereas Australian shares are still below April high.So what happened? What drove the underperformance ?Is it just a short term setback in Australian shares or does it signal something more fundamental?This note focuses on Australian shares relative to traditional global equity markets, as opposed to Asian and emerging markets where we generally expect underperformance by Australian shares.Australia's relative underperformanceAustralia's relative underperformance over the last year appears to reflect several factors:Rising interest rates at a time when interest rates were at or near zero in other developed countries and, in some instances, monetary conditions were still being eased.This led to concerns about the outlook for domestic cyclical sectors, notably retailing and housing, and bank credit growth.It also made bank term deposits look attractive compared to shares (unlike in the US where yields on term deposits are poor).There has also been concern internationally that Australian housing is in a bubble that is about to burst, with bad consequences for Australian banks.The strong Australian dollar has weighed on internationally exposed companies that don't have a hedge in the form of high commodity prices.Concerns Chinese authorities will over tighten and crash the Chinese economy in an effort to beat inflation have also weighed on the Australian share market, given the degree to which many global investors now see Australia as being connected to China.These concerns have all been reinforced by earnings downgrades in Australia whereas earnings expectations have been upgraded globally - see next chart.This has all seen the price to forward earnings ratio for Australian shares fall from 15.3 times at the end of 2009 to 12.7 now, whereas that for global shares has fallen by a smaller amount (i.e., from 14.1 times to 12.5 now).In an absolute sense we see Australian shares rising this year as the global recovery continues.The PE contraction has left Australian shares reasonably attractive, profit growth locally should be solid and Australian companies have scope to re-leverage, reflecting high cash levels and low gearing - see the next chart.However, it is too early to say that the relative underperformance of Australian shares has run its course.Concerns about an imminent collapse in Australian house prices resulting in massive damage to Australian banks are overdone.The threat to domestic growth from the strong Australian dollar and rising interest rates should be largely factored in and in any case recent benign inflation data and the disruptive effects from the floods suggest that the RBA will be on hold out to mid year.However, concerns about Chinese, and, more generally Asian tightening may linger for a while yet. So, on balance, we see global and Australian shares having similar returns this year.A longer term perspectiveIt is worth noting that despite Australian shares lacking the breadth and diversification of global shares, over the last 110 years Australian shares have had better real returns than most global share markets (Swedish shares being the exception). See the next chart.However, within this long run outperformance there have been lengthy periods of relative underperformance (such as in the 1970s due to relatively poor economic management in Australia) and the 1990s (the global tech boom) but also on a short term basis (say in 2003 in the first year of recovery from the tech wreck).While it's too early to say the relative underperformance of the last year is over, there are several reasons to believe the longer term period of outperformance in Australian shares that started in 2000 will continue:Firstly, Australian shares still pay higher dividend yields than mainstream global shares. The average dividend yield on Australian shares is 4% versus 2.6% for global shares.This is important because over long periods dividend payments constitute a significant component of the return an investor gets and so the higher the dividend yield the better (assuming it is not debt financed).Moreover, high dividend yields augur well for future returns, as they signal corporate confidence about future earnings and excessive retained earnings are often wasted.Secondly, the Australian economy offers higher growth potential than the US, Europe and Japan. Australia has stronger population growth which is feeding through into much stronger labour force growth.Australian households have not seen the same deterioration in their net wealth as has occurred elsewhere, public sector debt is very low and Australia is heavily exposed to high growth Asia and strength in commodity prices.All of these considerations are likely to translate into higher growth in earnings for Australian companies over the medium term compared to earnings growth in traditional global share markets.Reflecting the last two points, return projections (see below) based on current dividend yields and likely earnings growth tend to favour Australian shares.Over the medium term (say, five years), a good starting point to project likely returns is to add current dividend yields to likely long term nominal GDP growth as a proxy for earnings growth and hence capital gains from shares.Australian shares with a five year pre tax return projection of 9.5% pa come out well ahead of traditional global shares with a return projection of 6.9%.Finally, franking credits add over 1% to the post tax return from Australian shares for Australian investors.The higher dividend yield from Australian shares and franking credits mean Australian shares have a 2.9% pa return advantage over traditional global shares for Australian based investors.Concluding commentsAustralian shares have underperformed traditional global shares over the last year on the back of monetary tightening, worries about a housing bubble, the strong $A and Chinese tightening.While many of these should be largely factored in and we see better returns this year, some still linger (notably Chinese/Asian tightening) so it is too early to say that the period of relative underperformance is over.However, on a strategic, or five year basis, the combination of higher dividends, better growth prospects, less structural constraints and franking credits for Australian based investors suggest investors should maintain a bias towards Australian shares over traditional global shares, although maybe not as big a bias as was warranted a decade ago.

The local share market remains under selling pressure at lunchtime in the East, following a muted offshore lead.

By Marc Lichtenfeld, Healthcare Specialist - Wednesday, January 26, 2011: Issue #1436Very few Wall Street analysts are calling for the healthcare or biotech sectors to be among the top performers this year. And I love it. Why? Two reasons… The contrarian in me knows that this usually spells a big opportunity. Because Wall Street analysts have a horrendous track record for picking stocks. In fact, The Wall Street Journal has noted that analysts’ least favorite stocks usually outperform their favorite ones by a wide margin.For what it’s worth, Wall Street expects overall biotech sector revenue to climb by a fairly ho-hum 8% this year. Whatever.For starters, I suspect that figure is too conservative. And regardless of what Wall Street thinks, it’s no secret that I’m a big biotech fan, anyway. And at the moment, it’s easy to see why. As I’ve mentioned, there are several big healthcare trends that bode very well for biotech companies… not the least of which is the big pharma “patent cliff.” Given the drug makers’ shallow pipelines, biotech companies should be attractive acquisition candidates in the near future…For example, consider just a few companies with new breakthrough drugs that are expected to become blockbusters (among nearly a dozen others): Dendreon’s (Nasdaq: DNDN ) prostate cancer drug, Provenge. Vertex Pharmaceuticals’ (Nasdaq: VRTX ) hepatitis therapy, Telaprevir. The drug is expected to receive FDA approval in May and could generate as much as $4 billion in annual sales. Human Genome Sciences’ (Nasdaq: HGSI ) treatment for lupus.But these “hotshot” analysts are also overlooking what I think will be the biggest growth area for biotech in the coming months…The Emerging Market Drug ExplosionI’m talking about emerging markets, such as Brazil, India, China, Russia, Mexico and South Korea. Right off the bat, places like China, India and South America could see overall drug revenue growth rates as high as 15% per year, versus just 1% to 3% in the United States and Europe. Drug sales in “pharmerging” markets are expected to hit $400 billion between 2006 and 2020, according to IMS – growth of more than 600%. And it’s easy to see why… More People… More Drugs… More SalesJust like in the United States, emerging market populations are aging. For example, more than 200 million Chinese will be over 65 by 2020. And as people get older, they suffer more illnesses and chronic conditions – and therefore need more medicines and procedures. Additionally, as the middle classes boom in emerging markets, unhealthy western-style diets become more popular, which leads to more diseases like diabetes. Already, more than 30% of Chinese adults are considered overweight – a figure that’s expected to rise to 50% in the coming years.According to the International Diabetes Foundation, by 2025 there will be 80 million diabetics in India and 42 million in China. That compares to a forecast of 33 million in the United States by 2030. Pfizer (NYSE: PFE ) recently paid $200 million to partner with Biocon, in order to obtain worldwide rights to the Indian biotech company’s insulin products. But zero in on the emerging markets’ healthcare growth trend a bit more and you’ll find that a large chunk of the expansion will come from the onset of “biosimilars” – i.e. generic copies of biotech drugs…Why the Healthcare Heavyweights Are Embracing Emerging MarketsAt the moment, there are no biosimilars in the United States and very few in Europe. But don’t expect this to last long. In some cases, the big biotech and drug companies are even developing biosimilars of their own drugs because they know that their high-priced branded drugs won’t fly in emerging markets.For example, Amgen (Nasdaq: AMGN ) and Biogen Idec (Nasdaq: BIIB ) are examining ways to create biosimilars. Merck (NYSE: MRK ) and Parexel International (Nasdaq: PRXL ) are working together on a similar initiative. However, some emerging market companies are trying to beat the Americans and Europeans to the punch. In South Korea, for example, Samsung is investing 500 billion won (roughly $446 million) into biosimilars.It’s easy to see why biotech companies are pouring money into programs outside of the United States and Europe, too. Emerging markets represent a nascent market for these firms. And while very few have a meaningful presence, that’s starting to change. For example, Celgene (Nasdaq: CELG ), which has operations in various emerging markets, should get approval for Revlimid in Russia and Turkey later this year.Biotech: A Great Investment Now… and for a Long Time to ComeIn short, the biotech sector should enjoy a strong year, based on new drug approvals and the growing popularity of therapies that are often more effective and less toxic than traditional pharmaceuticals. But the move into emerging markets will be attractive for healthcare and biotech companies, due to the massive growth opportunities within them. And looking past 2011, the emerging market healthcare wave should be one that investors can ride for a decade or more.Good investing, Marc LichtenfeldReprinted 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/January/emerging-market-healthcare-trends.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.All views expressed are Investment U's, 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.

Fourth quarter (December 2010) results from Nielsen's Global Online Consumer Survey show that the Australian consumer has slightly lost their confidence, as a conservative drop of three points takes the Consumer Confidence Index score to 112 points (this compared to September's high of 115 (Chart 1)). But the latest score is still a good five points higher than the one recorded this time last year (107), and is still a positive result for Australia.

The Australian Dollar fell from just shy of parity yesterday to 0.9950 as news hit the wires that Prime Minister Julia Gillard announced that the cost of the recent funding in Queensland would take 0.5% off of Australia's GDP and that the rebuilding cost would be in the region of AUD5.6 billion.

The Australian dollar has opened lowerthis morning as the risk appetite of investors faded duringthe overnight session.

Most Asian markets ended higher Thursday, with Tokyo stocks getting a boost from a bullish earnings view and a slightly weaker yen, but declines in Chinese property developers weighed on shares in China and Hong Kong.

US pending home sales rose 2.0pct in December, above forecasts for a 1.0pct gain. US durable goods orders fell by 2.5pct in December, but was up 1.4pct excluding defence goods and aircraft.

By Rudi Filapek-VandyckDJIA up 4.39 to 11,989, the S&P500 up 2.91 to 1,299.54 and the Nasdaq up 15.78 to 2,755.There was plenty to get excited about for both bulls and bears last night and as a result financial markets moved rather erraticly, torn between good news and bad news. First signal with a bearish undertone came from Standard and Poor’s as the rating agency announced it cut Japan’s credit rating for the first time in nine years to AA- from AA. By doing so, S&P once again highlighted concerns about Japan’s fiscal sustainability in the longer run. The downgrade suggests Japan needs to make moves to rein in its debt, or at the very least put a plan in place to do so.In addition, economic data in the US further added to the day's disappointments. Durable goods orders fell 2.5% in December, below market expectations of a 1.5% gain, after aircraft orders declined by USD5bn. Initial jobless claims spiked 51K to 454K last week, but it goes without saying adverse weather provided an unquantifiable impact. For once, better news came from the US housing market with pending home sales printing above market expectations, rising 2.0%. Economists point out the index has rebounded sharply following the expiration of the homebuyer tax credit, and is back to levels that were occurring before its introduction.Corporate results in the US were once again mixed. Investors seemed to like the releases by Caterpillar and Qualcomm, but they showed disappointment post releases from AT&T and Procter & Gamble. After the closing bell shares in online retailer Amazon are under selling pressure post the release of Q4 results. The Dow Industrials traded above 12,000 for the second session in a row but in the end it had to retreat -again- below the magical psychological target. The S&P500 similarly missed the opportunity to (finally) close above 1300.Later today, all eyes will be firmly focused on the initial estimate of Q4 GDP data. The market is expecting the US economy finished calendar 2010 with an annualised growth rate of 3.5%.In Europe, mixed corporate results kept a lid on overall investor optimism. The German DAX closed 0.4% higher at 7156, the FTSE 100 fell 0.1% to 5965 and the Euro Stoxx 50 rose 0.7% to 2990. Keeping momentum positive on the old continent was the release of the Euro-zone Business climate index (Jan) which revealed a jump to 1.58 from an upwardly revised 1.38, pointing to outright European economic acceleration.FX markets experienced some genuine turmoil as the Japanese Yen turned south on news of the Japanese rating downgrade. The Aussie dollar was knocked around a few times, but ultimately saw buying support kicking in. AUD/USD opens in Asian trade on Friday morning at .9923, AUD/EUR opens at .7225, AUD/GBP opens at .6229, AUD/NZD opens at 1.2833 and AUD/JPY opens at 82.18.The Euro lifted to US$1.3755 from US$1.3640 over European and US trade and was near US$1.3725 in late US trade.Crude oil took its cue from weaker than anticipated economic data. The WTI futures contract for March fell 2.0% to USD85.61 per barrel. Spot gold equally had another challenging session. Spot gold dropped 2.5% to USD1312 per ounce overnight, its lowest level in over three months.Base metals, however, ticked higher following the previous day's rebound, with copper adding 2.1% to USD9523 per tonne on the LME, despite the mixed US data and despite expected seasonal slowdown in Chinese demand ahead of next week's Lunar New Year holiday. Recent outperformer tin added 1.2% to a new record high on continued tightening in supplies, while lead (+2.2%), aluminium (+2%), nickel (+0.8%) and zinc (+0.3%) were also all stronger.Agricultural commodities were mixed. Corn declined 1.1% after US exports of the grain disappointed expectations last week, and rain in Argentina boosted crop prospects, while wheat fell 1.2% but remained near its 2-year high. But sugar rose 3.2% on signs of rising demand in the EU and Russia. Soybeans increased 1%, and palm oil rose 0.4%.US treasury prices rose on Thursday (yields lower) after a successful sale of US$29 billion of seven-year notes. The Federal Reserve bought US$5.79bn of Treasuries maturing in the next 2-3 years. US 2yr yields fell by 4pts to 0.59% and US 10yr yields fell by 2pts to 3.39%.Today in Australia investors will zoom in on the Treasurer’s speech (around 1pm Brisbane time; 2pm Melb/ Sydney time) when he will flesh out the economic and fiscal impacts of the floods. Some commentators believe the floods, combined with the Gillard government's responses to it, are partially responsible for AUD weakness this month.SPI futures are indicating another subdued opening should be expected for the Australian share market today. SPI futures are currently indicating a gain of 12 points at the opening bell. However, the SPI has been far too optimistic whole week and why would it be any different today?[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.

Thanks to the strong dollar and shy consumers, plus the growing price war between Coles and Woolies, Australian inflation surprised on the downside in the December quarter.The headline rate for the CPI showed a 0.4% rise in the quarter, down from the 0.7% in the September quarter and well under the confident expectations from market economists for a 0.7% rise (and higher from a couple of forecasters).That was despite the expected sharp jump in fruit (up 15.5%) and vegetables (up 11.1%)in the quarter, an increase that is likely to be repeated to some extent this quarter because of the floods. They drove food prices up by 2.2% in the quarter, which was the biggest rise among all the groups in the CPI survey.The annual headline rate was 2.7% down on the 2.8% (restated) for the year to September.The underlying rate used by the Reserve Bank fell to the lowest level in a decade, and yet many in the markets remained unconvinced and were busy forecasting more price doom and gloom this quarter, after getting it wrong in the December quarter.That would normally raise the prospect of a rate cut in coming months, but the floods and the underlying price pressures from the resource boom will see the RBA sit pat for as long as possibleThe impact of the stronger dollar can be seen in the

The US Federal Reserve has again sat on its hands and not moved interest rates at its first meeting of 2011 in Washington. "The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period," the Fed said in its statement after the two day meeting.Wall Street eased after the statement came out as many investors had been looking for a more upbeat statement.That wording is the same as previous statements, which disappointed some commentators who believe the recent spate of better economic news could see the Fed giving an indication of a possible resumption of rate rises.Rates were cut to their current record lows in December 2008 and it has been the continuing high unemployment which has kept the Fed from lifting rates and trying a second round of quantitative easing which seems to have sparked a rebound in share prices and commodities, but not in interest rates which have risen, rather than fallen.But the Fed again said the economic recovery was "continuing" which was the same expression in the December meeting statement."Information received since the Federal Open Market Committee met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions."Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit."Business spending on equipment and software is rising, while investment in nonresidential structures is still weak."Employers remain reluctant to add to payrolls. The housing sector continues to be depressed."Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward."Fed chief Ben Bernanke will discuss the outlook at the National Press Club on February 3.He is also due to testify before Congress on monetary policy later next month.So more of the same of what we have been reading from the Fed for more than a wear.

The Australian share market is slightly lower at lunchtime in the East, following a muted offshore lead.

PaperlinX Ltd (ASX: PPX) says it expects a net loss for the six months to December 2010 as the strength of the Australian dollar causes a non-cash impact related to currency hedging options.

The Australian dollar has been largelyunaffected by last night's FOMC rate announcement.Given there was no new news from the Federal Reserve,the reactioEdit Htmln from currency markets was relativelysubdued.

By Rudi Filapek-VandyckDJIA closed up 8.25pts to 11,985, while the S&P500 gained 5.45pts to 1296 and the Nasdaq closed up 20.25pts at 2739.50.First it was Barack Obama's State of the Union speech. Then it was speculation about what the Fed's monetary meeting might deliver. Then it was the outcome of the Fed's meeting. Buyers found enough reasons to move back into global equity markets and other risk assets on Wednesday. The Dow Industrials traded above the magical 12,000 level for most of the day, while the S&P500 continued threatening a break above 1300, but as the last hour of the overnight session kicked in, so too did selling orders and US indices closed well off their highs on the day.Another chance missed to take the 12 for the Dow and the 13 for the S&P500.There was a positive print from the US housing market to fuel overall optimism earlier on the day. US New Home sales proved stronger than expected increasing to 329,000 up from a revised 280,000 and higher than market consensus at 300,000. Economists were quick in pointing out the jump came off ultra-depressed levels and new homes sales remain at "extremely depressed levels" - Mr Market wouldn't have any of it and took the glass as being half full. Never mind that many an economist believes that, with mortgage rates rising in recent months, sales could decline further over the coming months (double-dip for housing anyone?).On the other hand, the optimists can counter that the overnight release marked the biggest increase in sales in 18 years and the highest level of sales in eight months.Before the opening bell on Wall Street, European investors were equally in a positive mood. The German DAX closed the session 1.0% higher at 7127, the FTSE 100 rose 0.9% to 5969 and the Euro Stoxx 50 rose 0.3% to 2968. Obama's speech did not only mention "spending freeze", the President also proposed to cut the corporate tax rate.Buying orders started accelerating once it had been confirmed the US Federal Reserve kept the federal funds target rate unchanged between zero and 0.25%. The Fed pretty much stuck to its views from late 2010 and will thus continue expanding its holdings of securities as outlined after the November meeting.Economists at CIBC summed it up as follows:"As expected, the Fed left interest rates unchanged at zero, and announced no change in its QE2 program, leaving rates at exceptionally low levels for an "extended period". The description of the economy was not much changed from the November meeting, seeing household spending picking up (previously described as only moderate) along with business equipment, but ongoing weakness in housing, and inflation stable. That slightly better description doesn't alter the view that the pace of growth is still "insufficient" in terms of generating job growth, and not a threat to inflation. QE2 plan stays at $600 bn, and there is no longer a vote against it, with Hoenig having dropped out as a voter, and Plosser, a QE critic, not opting to vote against the statement. No market impact likely, although the curve has priced in some rate hikes for late 2011 that we see as highly unlikely."Currency markets didn't really know what to make of it all and big movements remained absent last night. The euro held between US$1.3650 and US$1.3715 over European and US trade and was near US$1.3680 in late US trade. The Aussie dollar eased from US99.95c to US99.30c in European and US trade but was near US99.55c in late US trade. And the Japanese yen eased from 82.00 yen per US dollar to near JPY82.55, and was near JPY82.50 in late US trade.US treasury prices hit session lows (yields higher) following the Federal Reserve statement. A better-than-expected new home sales result and increased supply of bonds combined to weigh on prices. On Wednesday US$35 billion of five-year notes were sold and US$29 billion of seven-year notes will be sold on Thursday. US 2yr yields rose 5pts to 0.64% and US 10yr yields rose 9pts to 3.43%.Crude oil and base metals markets recovered strongly from steep losses in the previous session. The Nymex crude oil contract rose by US$1.14 to US$87.33 a barrel. Base metal prices on the London Metal Exchange equally took their cue from general optimism. Zinc rose 2.7%, lead rose 2.5% and nickel rose 2.3%. Share prices of mining stocks responded accordingly.Precious metals had a better session as well with silver significantly outperforming gold.Agricultural commodities were also mostly carried higher. Sugar was the biggest mover, rising 4.1% on renewed concerns about global supply this year. Wheat was also up strongly, rising 2.2% after Algeria reported it had accelerated its grain imports to try to head off possible social unrest over higher food prices. Corn rose 2.1% while soybeans rose 0.8%.Central bankers in New Zealand and Japan have kept interest rates unchanged, while India tightened. Later today we will welcome weekly jobless claims, durable goods orders and pending home sales data in the US. During the local session we will see the first corporate results and more trading updates and quarterly production reports being released. See our calendar for more details.Greg Peel returns on Monday. I will be on Sky Business today (Lunch Money, 12-1pm)[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 Dow Jones Industrial Average rose above the 12000 mark for the first time in almost three years and flirted with that milestone throughout the session Wednesday, as investors cheered President Barack Obama's State of the Union address and unanimous decision by the Federal Reserve to stay the course on supporting the economy.

US new home sales soared by 17.5pct to 329,000 in December. It was the biggest increase in sales in 18 years and highest level of sales in eight months.

As expected, the local unit was fairly subdued throughout much of the Asian session due to a national public holiday in Australia.

FNArena has added another video to its Investors Education section on the website.ATW's Jerry Simmons has observed many USD-oriented assets are facing overhead resistance. This offers two potential scenarios. Either resistance proves too strong or we will experience a bullish break-out through these key price levels. Simmons expects a definitive outcome in this battle between bears and bulls within the coming week.SummaryIn this video, Jerry Simmons, Senior Mentor and Co-Founder of the Advanced Trading Workshop, Inc, analyses the trading range in which many USD-denominated currency pairs have found themselves for the past weeks, including the metals such as copper, gold, silver and platinum. He concludes that we should expect a breakout with a sustained directional move within a week. This is also in line with the big traditional January move. The same sideways market has characterised the 30 yr bond market and the 10 yr note markets and the same potential for a sustainable break-out exists in these two markets.Details:AUDUSD:There is overhead resistance at 0.9970 – 1.0030. If we get a confirmed break-out above 1.0030, chances are we will move further up quickly by 120 to 170 pips, to 1.0150 – 1.0200.Support below the market is to be found at 0.9800 – 0.9850. Should we get a confirmed break-out below 0.9800, a swift move further down by90 - 140 pipsto the next level at 0.9660 – 0.9710 can be expected, with the emphasis being on the lower margin of those two, i.e. 0.9660.COPPER:TTPs constructed in a recent video projected the top of the price move at current levels.Current levels could be exceeded up to a maximum level of 4.62 and still maintain the validity of the Double Top structure. The current level also re-tests the May 2008 high. If copper rolls over now, it would come off that May 2008 high and the Double Top formation, i.e. a down move could be expected to develop strong momentum and be sustainable.GOLD:The gold market is currently characterised by two key support zones below and 2 key resistance zones above3 the market:2nd resistance zone above: 1420 - 14351st resistance zone above: 1390 - 1395Current market1st support zone below : 1350 - 13552nd support zone below: 1317 - 1330.To view the ATW Strategic Prep Video (originally from November 29, 2010) titled "Analysis AUDUSD, US, HG, 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_videos&vid=22All 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.