The Monday Report

This story features PALADIN ENERGY LIMITED. For more info SHARE ANALYSIS: PDN

By Greg Peel

Wall Street opened weaker in the Friday session on fears it was going to get ugly once more in Egypt, but fear turned to relief on the announcement President Mubarak would step down immediately. This became the underlying catalyst for yet another up-day as confidence continued to grow in US stock investment. The Dow closed up 43 points or 0.3% while the S&P gained 0.6% to 1329.

There remains concern nevertheless that while Mubarak's departure signifies freedom for all Egyptians it also ushers in a period of uncertainty as to just which groups will gain influence when elections are eventually held. And emboldened by the success of people power in Egypt, protests were stepped up in Algeria and Yemen. North Africa and the Middle East are not yet done with the fight for transition.

As US stocks sail merrily on, scenes from Cairo have diverted attention away from the ongoing financial struggle in Europe. Portuguese bond yields blew out again on Friday and Moody's downgraded Irish bank debt, voicing concerns that the government will be unable to handle the debt burden alone. The implication here is that bank debt restructuring may be necessary in order to avoid default. Over in Portugal, the government's cost of borrowing is becoming increasingly destructive.

The result of the above was another 0.25% gain for the US dollar on Friday, with the index closing at 78.43. The Aussie has slipped to US$1.0020 and gold fell back US$5.10 to US$1356.30/oz.

With peace in Egypt concerns over the Suez Canal abated on Friday, sending oil down US$1.15 to US$85.58/bbl. Base metals were nevertheless stronger in London, mirroring confidence in stocks, albeit copper is still sitting just under US$10,000/t.

The SPI Overnight jumped 39 points or 0.8%, implying a recovery of ground lost on Friday when it appeared the situation in Egypt was worsening.

We thus enter this week with Wall Street on a positive bias, aided by its morphine drip-feed of QE2. Inflation will nevertheless be in the frame this week across the globe.

Beijing is playing hard to get as usual, so it appears the economic data releases assumed to be scheduled for last week will occur this week. Today (apparently) sees the trade balance, and tomorrow the PPI and CPI readings for January which will provide clues regarding further monetary tightening. Ben Bernanke is not the least bit worried about US inflation but the US CPI is out on Thursday. The Bank of England is more concerned however, and its CPI reading on Wednesday may help finally influence the BoE to raise rates next month.

It's a busy week for data in the US beginning with retail sales, business inventories, Treasury flows, housing market sentiment and the Empire State manufacturing index on Tuesday. Wednesday it's industrial production, housing starts and the PPI, along with the release of the minutes of the last Fed meeting. Thursday wraps up with the CPI, leading index, and Philadelphia manufacturing index.

On Friday the Fed chairman will speak in Paris on the subject of global imbalance.

We're also going to be flat out here in Australia given the result season steps up a gear this week and next. Leighton Holdings ((LEI)), Paladin Energy ((PDN)) and West Oz Newspapers ((WAN)) are among today's highlights, and thereafter readers are directed to the FNArena calendar.

On the economic front, today in Australia sees housing and investment finance. On Tuesday the minutes of the last RBA meeting will be released but Glenn Stevens has already preempted their contents in his testimony to parliament on Friday. Interest rates will remain stable for a while. Wednesday sees vehicle sales and the Westpac leading economic index.

Rudi will be appearing on the Lunch Money program on Sky Business on Thursday at midday. 

For further global economic release dates and local company events please refer to the FNArena Calendar.

Click to view our Glossary of Financial Terms