Australia's economy expands unexpectedly in first quarter

[Shadows]

Australia's gross domestic product climbed in the first quarter, compared with a year ago, defying expectations for a second quarter of contraction, according to government data released Wednesday.

The nation's GDP expanded by seasonally adjusted 0.4% in the first quarter, both in comparison with the same quarter a year ago and with the fourth quarter, the Australian Bureau of Statistics reported.

The first-quarter reading came in above economists' expectation for a fall of 0.1% on year and a climb of 0.1% quarter-over-quarter, according to a poll conducted by Dow Jones Newswires.

Following the news, Australia's S&P/ASX 200 gained 0.3% in Sydney. The Australian dollar also strengthened, with one Australian dollar buying 82.26 U.S. cents, up from the previous close of 82.07 U.S. cents.

The positive reading means Australia's economy avoided a second-straight drop in GDP, a popular definition of a recession.

The bureau revised downward its fourth-quarter GDP reading to a contraction of 0.6% from a previously reported drop of 0.5%. The fourth-quarter slump was the first such contraction in eight years.

On a seasonally adjusted basis, final consumption expenditure was up by 1.2% in the first quarter from a year earlier, and up 0.5% from the fourth quarter, data showed.

The bureau said that growth on the expenditure side over the past four quarters was driven by household spending and by exports, offset by a fall in inventories

[Shadows]

The Australian dollar advanced against major currencies Wednesday, spurred by a surprise growth in the nation's economy and on higher risk appetite amid sustained hopes of a global economic recovery.

The impact may, however, be mixed for Australian companies, with a stronger local currency easing the burden on companies with foreign creditors and aiding funds investing in real estate, but pressuring earnings for exporters and companies with overseas operations.

"We believe a handful of trusts will have debt-based [leverage] reduced by 1% or more as a result of Australian dollar currency appreciation, led by Westfield [Group] and ING Office," Credit Suisse analysts wrote in a report.

CUR_AUDUSD 0.81, -0.01, -0.72%
1.000.900.800.700.60JJASON09FMAMThe Australian dollar was buying $0.8241 late Wednesday morning, compared with its close at $0.8207 in the previous session, and more than 35% above its 52-week low near $0.61 in October.

Against the Japanese currency, the Aussie dollar rose to 78.89 yen from 78.55 yen.

The advance came after data released earlier in the day showed Australia's gross domestic product climbed 0.4% in the first quarter from the same period a year earlier, beating expectations of a 0.1% decline. See full story on Australian GDP data.

In the Sydney stock market, shares of retail property group Westfield (AU:WDC 12.35, +0.71, +6.10%) climbed 2.3%. ING Office Fund (AU:IOF 0.62, +0.02, +3.33%) , which invests in real estate, lost 3.3%, as investors locked in profit after the stock rose in the previous 13 sessions.

Credit Suisse said the positive impact on Westfield from the Australian dollar's appreciation "is roughly the equivalent of the company completing a $750 million equity offering."

The brokerage, however, cautioned that a rising currency could work as a "double edged sword," narrowing gains for corporations' offshore asset-sale proceeds and earnings.

"Earnings impacts could occur near-term due to the lack of full income hedging for many trusts," it said.

The benchmark S&P/ASX 200 Index rose 0.9% to 3,991.20 in Sydney, after a tentative start.

Elsewhere in the region, Japan's Nikkei 225 Average gained 0.4%, China's Shanghai Composite added 0.3%, and South Korea's Kospi inched up 0.2%, while Hong Kong's Hang Seng Index rose 1.6%, rebounding from Tuesday's fall.

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The Reserve Bank of Australia left its policy rate unchanged, as expected, Tuesday on further signs the global economy is stabilizing, but the central bank also said there was room for future rate cuts if necessary.

In a statement, RBA Gov. Glenn Stevens said that market and mortgage rates are at very low levels by historical standards and those for business loan rates are below average, but "much of the effect of this is yet to be observed."

He said there were signs of a turnaround in the global economy, though China and other emerging nations would recover faster than more advanced economies.

Analysts had seen only an 8% chance of a rate cut, and economists unanimously expected the central bank to leave interest rates unchanged, according to a survey by Dow Jones Newswires.

Immediately following the decision, one Australian dollar bought $0.8091, slightly lower than the previous close of $0.8095.

At the board meeting held on May 5, the central bank had also kept the policy rate unchanged. See full story on May 5 meeting.

But in total, the RBA has cut its rate target by 425 basis points since September 2008.

On Monday, government data showed that Australia's current-account deficit widened in the first quarter, but by a smaller margin than expected

[Cottonfoot]

Nooooo, bring back the recession and the days when just about every company's shares were at 52 week lows, if only I had of invested in shares 4 months ago instead of my car. Ohwell at least the strong AUD means I saved some money on my overseas purchases

[Shadows]

yeap, save some more and get the evo x wing from me :p

[Loki]

Nooooo, bring back the recession and the days when just about every company's shares were at 52 week lows, if only I had of invested in shares 4 months ago instead of my car. Ohwell at least the strong AUD means I saved some money on my overseas purchases

When it was at it's worst I took all my super from it's "Balanced" Option and invested it into Australian Shares. WINRAR!!

[JaCe]

I see there are others who have significant interests in following the relatively uncommon AUD/SGD pairing. Whilst the MAS (Singapore's RBA equivalent) really should stop butting in to move their currency (Aussie's RBA stopped doing this decades ago- well stopped doing it in big moves), the negative USD sentiment is really the only thing driving up AUD/SGD.

[Shadows]

I see there are others who have significant interests in following the relatively uncommon AUD/SGD pairing. Whilst the MAS (Singapore's RBA equivalent) really should stop butting in to move their currency (Aussie's RBA stopped doing this decades ago- well stopped doing it in big moves), the negative USD sentiment is really the only thing driving up AUD/SGD.

Not really is due to the weakness of USD. in fect AUD strong is simply because the australia economy has started to rebound. exspecially on the mining industry. according to a recent report, please read below .

Asia coal prices rise to 3 month high on oil and economy
Sunday, 07 Jun 2009
Reuters reported that prices of power station coal from Australia, a benchmark for Asia, rose to a three and a half month high of over USD 72 a tonne on higher oil prices and expectations that a recovery in global economy would spur demand.

Thermal coal prices in the globalCOAL Newcastle index rose USD 6.48 from the previous week to USD 72.79 a tonne, the highest since February 24 when it stood at USD 73.38 a tonne.

A regional trader said that “There is some direction now with the gain in oil prices. Also, there is positive sentiment about the global economy that pulling up prices.”

Crude oil steadied at USD 66 a barrel on last Thursday after hitting nearly 7 month high of USD 69.05 a tonne on last Tuesday on expectations of an economic recovery. Strong demand from China and India is also expected to spur recovery in global coal in the second half of this year, industry participants said at a recent industry gathering. There were no physical trades registered on globalCOAL.

Chinese buyers were still scouting for Indonesia coal. One handimax of 6,300 kcal/kg air-dried basis, FOB mother vessel, has been sold to a Chinese buyer at USD 55 a tonne for delivery in July.

An Indonesian trader said that “The price was still a bit low because it was settled in April. We still see a lot of inquiries from China. Now, everybody suddenly wants to trade with China.”

The trader said that Indonesian coal prices are likely to go up to around USD 60 in coming weeks in line with a recovery in global coal prices.

About 11,000 tonnes of Indonesian sub-bituminous coal of 5,600 kcal/kg ADB were traded at USD 39.5 a tonne, FOB barge from East Kalimantan but there were no details of buyers.

Another Indonesian trader said that “Inquiries are now starting to come in, because of a rise in prices.”

Traders said that in the domestic market, demand remained slow as power plants still have abundant supplies, of more than a month, adding power plants may be back to the market in the third quarter to secure stockpiles ahead of the rainy season

[JaCe]

I still think currency movements is dictated more by broad USD weakness due to risk appetite improving around the world as opposed to commodity prices alone boosting AUD. Sure it helps but equities market rallies are more indicative.