FYI | Sep 25 2007
By Greg Peel
Thar’s gold in them thar hills!
Or at least that’s what we’re supposed to hear from the BHP Billiton (BHP) resource upgrade on Wednesday. (On the old stock exchange floor, BHP was known as “Hills”). The rumour is that BHP will announce Olympic Dam holds not only the world’s largest reserves of uranium, and the fourth largest of copper, but it might just be the world’s biggest gold deposit as well. According to the Fin Review, it would require a tripling of the current deposit estimate to knock off the 175moz Muruntau resource in Uzbekistan.
This rumour, along with a general euphoria over rising commodity prices (at least in US dollar terms), was enough to send the Big Australian up 5% yesterday and add 30 points to the index.
The move was not lost on Wall Street either, but after reaching as high as up 54 points in the morning the Dow slipped to be down 61, or 0.4%, on the close. The S&P was down 0.5% and the Nasdaq 0.1%. Commentators suggested there was an element of profit-taking following a remarkably strong previous week and ahead of the first of a barrage of economic data tonight.
Existing home sales is one release set for Tuesday, and the home builders copped a fair bit of selling ahead of it. The builders have put in quite a hefty bounce since the Fed rate cut, so maybe it was time to cash in. A weak profit report from one builder – Lennar Corp – precipitated the fall.
The financial sector has also bounced handsomely, but it was again sold off last night following a report from the IMF suggesting the global credit crisis would be “protracted” and would serve to dampen global economic growth.
Dow component General Motors came under pressure as the first general strike of its autoworkers in 37 years was announced. This has been anticipated, so there wasn’t much movement in the share price.
It was otherwise a fairly quiet night in other markets. The oil price managed to fall US67c to US$80.85/bbl for November delivery as a storm in the Gulf abated. It had earlier caused all drilling operations to cease. Gold eased off a dollar to US$730/oz having been higher in the session as the US dollar slipped again against major currencies. A combination of profit-taking in gold, the lower oil price and, perhaps, the BHP rumour, helped to stymie the rally.
Base metals were mostly slightly stronger in London, with copper posting another steady 1.2% rise and lead jumping 2.7%.
The SPI Overnight fell 12 points.
