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Wall Street closed higher Monday on the back of a US$35.5 billion asset sale by AIG and merger talks within the healthcare sector. Gains were broad based with 80% of the Dow components in the black.

In economic news, the Institute for Supply Management's manufacturing index dropped from 58.4 in January to 56.5 in February. Forecasts were for a decrease to 57.9.

The government reported a 0.6% fall in construction spending during January, which was in line with forecasts.  

Meanwhile, personal income and spending rose 0.1% and 0.5% respectively in January. Expectations were for both to rise 0.4%.

The Dow Jones gained 78.53 points, or 0.76%, to 10,403.79, the S&P's 500 put on 11.22 points, or 1.02%, to 1,115.71 and the NASDAQ rose 35.31 points, or 1.58%, to 2,273.57.

American International Group rallied 4.1% after the announcement it was selling its Asian life insurance business to the UK’s Prudential. AIG allocated US$16 billion from the deal to repay the government. 

Financials were mixed, with the majors within 0.3% either side of the gain line. JPMorgan shed 0.3%, while Bank of America added 0.3%.

OSI Pharmaceuticals spiked 52% after Japan’s Astellas Pharma made an offer for the US company that represented a 40% premium to its closing price on Friday. OSI rejected the offer saying it undervalued the company.

In further takeover news within the healthcare sector, Millipore climbed 11.1% after Germany’s Merck said it would pay US$7.2 billion for the US life science company.

Heavy industry companies and Dow components Caterpillar and Boeing gained 1.4% and 1.3%.

Energy stocks made ground despite a fall in the price of crude. ConocoPhillips was the best performer, adding 1.9%.

NYMEX light crude oil for April delivery dropped US96 cents to US$78.70 a barrel.

COMEX gold for April delivery slid US60 cents to US$1,118.30 per ounce.

European Markets

European stocks advanced on reports the French and German governments were prepared to provide Greece with financial assistance. Miners rallied on the back of a rise in commodity prices.

The UK benchmark FTSE 100 rose 51.42, or 0.96% to 5,405.94, the German DAX rallied 115.05, or 2.06% to 5,713.51 and the French CAC40 gained 60.74, or 1.64% to 3,769.54.

Aussie miners BHP Billiton and Rio Tinto added 3.2% and 3.1% after the earthquake in Chile increased copper prices.

Antofagasta, Xstrata and Anglo American were 3.7%, 3.6% and 2.5% higher respectively.

Energy majors BP and Royal Dutch Shell put on 3% and 2.4%.

HSBC dragged after missing full-year estimates. The British bank’s shares closed 5.2% cheaper.

Peers Lloyds and Royal Bank of Scotland lost 4.3% and 2.6%.

On the continent Deutsche Bank rose 2.1%, while BNP Paribas and Societe Generale added 2.2% each.

Insurer Prudential slumped 12% after agreeing to purchase the Asian arm of American International Group. Aviva fell 3.9% as the deal is likely to end any hope of takeover offers for the company.

Lanxess climbed 8% after the German specialty chemicals maker upgraded its profit forecast.  

Japanese Markets

Japanese stocks edged higher Monday, with the gains coming largely from the banking sector where JPMorgan upgraded the sector to overweight, from neutral. Miners also gained as commodity prices rallied.

The Nikkei 225 added 46.03, or 0.45% to 10,172.06.

Mizuho Financial was 3.5% stronger, while larger rival Mitsubishi UFJ Financial Group rose 1.6%. The former’s stock traded 133 million shares, nearly twice as high as Mitsubishi UFJ, the second most traded stock.

Sumitomo Metal Mining added 1.1% on higher commodity prices.

Nippon Mining Holdings, Japan’s biggest copper climbed 2.5%. Mitsubishi Materials Corp, the third largest producer of copper added 0.4%.

Sumitomo Bakelite Co., a synthetic-resin maker, rose 2.8%.

Elsewhere, consumer electronic giants Panasonic and Sony climbed 1.6% and 0.2% respectively.

It wasn’t so good for Toyota, with the automaker down 1%.

Hong Kong Markets

The Hang Seng rallied more than 2% to start March. Banks rose on hopes the Chinese government would seek to maintain a loose monetary policy, while miners were also strong.

The Hang Seng climbed 448.23, or 2.17% to 21,056.93.

Bank of China spiked 4%. Industrial and Commercial Bank (ICBC) rose 5.1% and China Construction Bank Corp was 4.1% stronger.

HSBC was 0.9% stronger.

Clothes maker for Wal-Mart amongst others, Li & Fung rallied 3.3%. Shoe maker Yue Yuen was 1.3% above the line.

Following disruption to supply of copper from the world’s number one copper producer, Chile, Chinese Jiangxi Copper Co. spiked 5.8% as prices soared.

Cnooc and Petrochina put on 0.3% and 2.1% respectively.

The Australian sharemarket rallied 1.1% Monday on the back of a consistent gains among blue-chip stocks, in particular the banks and consumer staples. Better than expected economic data and a boost to company profits in the December quarter increased the likelihood of a rise in interest rates tomorrow.

In economic news, the TD Securities-Melbourne Institute inflation gauge rose by just 0.1% in February. The previous two months the inflation measure had increased 0.8%.

Meanwhile, according to the Housing Industry Association, the volume of homes sales rose 9.5% in January, the largest increase in five months. Home sales decreased 4.6% in December.

An increase in new orders saw the Australian Industry Group/PricewaterhouseCoopers performance of manufacturing index rise by 2.8 points to 53.8 in February.

At the end of the day, The All Ords was up 43.8 to 4,694.9, while the ASX/200 added 48.8 to 4,686.5. Over 2.4 billion shares worth around $5.1 billion had changed hands.

BHP Billiton was the only major player to lose ground as it went ex-div. Its shares dipped 12c, or 0.3% to $40.98, while the Materials and Resources sector rose 0.7% overall.

Metals prices rose in London overnight, including the biggest rise in the price of copper in almost a year after the earthquake in Chile stopped supplies from the country.

Rio Tinto, the world’s third largest miner, was 90c, or 1.3% higher at $71.40. The miner said it had increased its interest in Canada's Ivanhoe Mines to 22.4% following the acquisition of a further 15 million shares.

OZ Minerals rallied 5.3% to $1.095.

Gold miners Newcrest and Lihir were 2.6% and 3.4% stronger at $32.14 and $2.74 respectively. 

Meanwhile, Alumina spiked 4.3% to $1.57. The price for aluminium rose 2.4% in London on Friday.

The Banks and Financials sector rose 1%. ANZ and Westpac gained the most ground among the big four banks, up 1.9% and 1.5% to $23.59 and $26.53 respectively.

CBA added 1% to $54.45.

The insurers were weak in the wake of the earthquake in Chile and warnings of the potential for further natural disaster activity across the globe. Suncorp-Metway and AXA Asia Pacific were down 2% each.

IAG bucked the trend climbing 14c to $4.09, while investment bank Macquarie added 1.6% to $46.00.

The Energy sector was 0.8% higher led by strong gains among the mid-caps. Origin and Santos put on 1.1% each to $16.99 and $13.10.

Woodside edged 10c higher to $43.47, while WorleyParsons advanced 1.2% to $24.88.

Aquila, Riversdale Mining and AWE were between 3.1% and 4.3% above the gain line.

After a slow start to the day the Property Trust sector finished 0.6% in the black, with most of the majors closing higher.

Lend Lease was an exception, sliding 0.7% to $9.28 after completing the institutional component of its $434 million capital raising.

Westfield and Stockland put on 0.7% and 1% to $12.11 and $4.10.

The Consumer Discretionary sector was 1% higher. Retailers were mixed, with Harvey Norman easing 1c, or 1% to $3.79, while David Jones added 7c, or 1.5% to $4.81.

Among the gamers, Aristocrat and Tatts were up 1.7% and 3.3% to $4.30 and $2.48 respectively.

Seven led the way higher for media stocks, putting on 20c, or 2.7% to $7.54.

The Consumer Staples sector rallied 3% on the back of 2.6% and 4.7% gains to heavyweights Woolworths and Wesfarmers. They were trading at $27.54 and $32.60 respectively.

Toll bounced back from very heavy selling in the last few days last week. Its shares surged 45c, or 6.6% to $7.25 as the Industrials sector rose 1.4%.

Brambles added 17c, or 2.4% $7.11, while engineering firm Downer EDI surged 4.2% to $8.23.

Healthcare advanced 1.2% on the back of the sector’s largest company, CSL, adding 46c, or 1.3% to $34.85.

Cochlear rose $1.49, or 2.3% to $64.94.

A 3c drop to $2.94 from Telstra led the Telecommunications sector 1.1% lower.

Around the region, the Nikkei 225 was up 76.3 to 10,202.4, while the NZSE50 added 8.1 to 3,164.2. The Straits Times Index rose 20.3 to 2,771.2. The Hang Seng rallied 391.4 to 21,000.1.

Spot gold was trading at US$1,117.10 per ounce, while the Aussie was buying US$0.8973.

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AWB completes sale of Landmark Financial Services
AWB said it has completed the sale of Landmark Financial Services’ $2.3 billion loan book and $300 million debenture book to Australia and New Zealand Banking Group. The agribusiness said it would incur a significant item in the half year ending 31 March 2010, which is expected to be in line with previous guidance at a $62 million pre-tax loss on the sale together with restructuring costs, subject to finalisation of completion of accounts.

At the end of the day, AWB shares were up 2c to $1.04, while ANZ shares were up 45c to $23.59.

Rio to increase stake in Canada's Ivanhoe
Rio Tinto said it has agreed to acquire 15 million shares in Ivanhoe Mines Limited for C$244.7m. The mining giant said the acquisition would increase its ownership in Ivanhoe Mines by 2.7% to 22.4%.

By the close, Rio Tinto shares were up 90c to $71.40.  

Westpac operates as single ADI
Westpac Banking Corporation said today that it commenced operating as a single authorised deposit-taking institution (“ADI”). Australia’s second largest bank by market capitalisation said in moving to a single ADI all the assets and liabilities of St.George Bank Limited have become those of Westpac’s.

At the finish, Westpac shares were up 40c to $26.53.

AGL to construct Macarthur Wind Farm
AGL Energy said it has entered into conditional arrangements for the construction of Macarthur Wind Farm in south-west Victoria under a joint venture with New Zealand’s Meridian Energy. The company said the agreement follows the Federal government’s announcement last week of proposed changes to the operation of the Renewable Energy Target scheme.

At the close, AGL shares were up 28c to $14.65.

Lend Lease raises $434m, more to come
Lend Lease said it has successfully raised $434m from the institutional component of its fully underwritten equity raising announced last Thursday. Existing shareholders subscribed for over 87% of their entitlements available under the Institutional Entitlement Offer.

At the final whistle, Lend Lease shares were down 6c to $9.28.

Clive Peeters profit slumps to just $424k
Clive Peeters squeezed out a modest $424,000 profit in the six months to 31 December, despite posting revenue of $252m. The profit figure was down 57%, while revenue dipped just 5% from the previous corresponding period.

At the end of the day, Clive Peeters shares were down 2c to 26c.

Extract appoints Leslie as CEO
Extract Resources announced the appointment of former Rio Tinto board member Jonathan Leslie as the Group’s CEO with immediate effect. The uranium explorer said Mr Leslie was on the board of Rio Tinto PLC for nine years and CEO of two of Rio Tinto’s major product groups.

By the finish, Extract shares were up 15c to $7.40.

Sigma Pharmaceuticals Limited (SIP) requested its shares be suspended from trading as the company expects to make an announcement to the market in relation to revised earnings guidance for the year ended 31 January 2010. The company said it expects that the suspension remain in place until it makes an announcement concerning revised guidance for the year or requests that the suspension be lifted. Sigma expects to make an announcement to the market concerning the revised guidance before the expected date for the release of its preliminary final results.

AWB Limited (AWB) said it has completed the sale of Landmark Financial Services’ $2.3 billion loan book and $300 million debenture book to Australia and New Zealand Banking Group Limited (ANZ). The agribusiness said it would incur a significant item in the half year ending 31 March 2010, which is expected to be in line with previous guidance at a $62 million pre-tax loss on the sale together with restructuring costs, subject to finalisation of completion of accounts.

AWB managing director, Gordon Davis, said the completion of this transaction simplifies the business and enables AWB to significantly reduce its level of debt.

“We look forward to expanding our successful relationship with ANZ as we continue to deliver outstanding service to Australia’s rural and agricultural community,” Mr Davis said.

The company said that under the relationship Landmark would earn a fee on all loan referrals of Landmark customers as well as a trail fee on existing loans and all future loans referred via the relationship.

As at 1450 AEDT, AWB shares were up 1.5c to $1.035, while ANZ shares were up 40c to $23.54.

One of the China characteristics from the past few years was that the world's new super-power in manufacturing was exporting deflation across the world, leading to ever lower prices for products "Made in China" and a sheer impossibility for manufacturers elsewhere to compete on a like-for-like basis.

That is changing, however, and rather rapidly. China will be battling inflation this year and one of the main drivers behind this change are rising wages. Anecdotal evidence has it that factory owners in the Pearl River Delta are finding it hard to attract labourers, despite offering wage increases of up to 15% versus a year ago.

China's headline inflation number in January looked okay at face value, but few economists would accept this as a blue print for the year ahead. In fact, and as rightly pointed out at the time by China watchers at ANZ Bank, the underlying trend in January is already pointing towards much higher inflation numbers in the months ahead.

At face value China's January CPI grew by 1.5% annualised, down from 1.9% in December, and still well below the central bank's target range of 3-4%. But there are plenty of signals, including the aforementioned wage pressures in factory regions, that suggest authorities better act now.

This is why the reserve requirements for Chinese banks have been increased on the Friday before Chinese new year, signalling Chinese authorities are well aware of the need for decisive actions, and they do understand there is a sense for urgency.

But lifting bank reserve requirements alone won't be enough. As more and more economists are looking into the problems and challenges facing Chinese policy makers this year, there is a growing sense that much more will need to be done.

So what should investors expect? More reserve requirements? We already had two of 0.50% each in both January and February. Will there be a hike in Chinese interest rates? Several hikes? A revaluation of the Chinese renminbi?

Most likely all of the above.

Chances are investors won't have to wait long either. Already the restrictive policy move just before Chinese new year shows the central government is aiming to stay at the forefront of the action curve, keen to contain future problems before they have a chance to grow out of hand, rather than having to play catch up at a later stage.

First, let us briefly return to why Chinese businesses are facing the prospects of rising labour costs. It was always widely assumed, and reported, that China has a sheer endless supply of labour, which is, of course, not true. If anything, China has a relative unfavourable balance in its population, being already skewed towards elderly, especially given the early stage of transition and development the country is in.

In addition, the sharp drop off in export orders during the GFC in combination with higher prices for agricultural products has narrowed the financial gap, and thus the attractiveness, to move out of rural areas back to the cities. This is even more the case since the Chinese government has absorbed a big chunk of job losses through numerous and large infrastructure projects that for many Chinese are closer to their rural roots than the cities.

China is a big country and exact insights are seldom available, even for economists on the ground who spend most of their days deciphering what is happening inside the country. Many of them will be watching the factories closely now the country jumps back into full gear after a week of celebrating.

But rising wages are far from the only threat to Chinese consumer prices. China watchers at Dragonomics, a division of GaveKal dedicated to researching China, reported this week they believe 9 out of 15 CPI components in China are now firmly on the rise.

And those China watchers at ANZ Bank who, earlier this month, were quick in picking up that China had an underlying inflation problem, arguing quick policy-response is a necessity, have now followed up with a special report on China. Their conclusion: if Chinese authorities do not act very soon their economy will start overheating a la the first half of 2008.

That wouldn't be good news as the unsustainable growth rhythm of 13%-plus was followed by a sharp decline into single digits after the Beijing Olympics later that year. No doubt, it is this scenario the Chinese policymakers are trying to avoid this time around.

According to ANZ Bank's proprietary China Activity Index, overall activity levels inside the Chinese economy have already exceeded the aforementioned levels of 2007/first half of 2008. This suggests China risks overheating in the very short term.

This is exactly what ANZ economists are predicting – in the absence of more restrictive policy actions. Enter the US Federal Reserve Bank. One of the immediate responses from economists worldwide after the Fed lifted the discount rate for emergency loans to US banks by 0.25% on Friday was that the move to normalisation would be welcomed by Asian central bankers as they are unlikely to act as long as the US remains in a policy bind.

ANZ highlights there is one important difference between China now and back in 2008. As export markets have remained weak, the Chinese economy is only overheating in the inland provinces, not in the coastal areas that are more export oriented. This is opposite what happened in 2007 and 2008. But then again, it would seem export markets are improving, so the problem will only become worse.

In addition, reasons ANZ, Chinese infrastructure projects will keep commodity prices at elevated levels, which means the country will continue importing inflation.

So far, Chinese authorities have lifted reserve requirements for banks by 100 basis points, in addition to various other restrictions, all aimed at draining excess liquidity out of the banking system. But it won't be sufficient to keep the brakes on inflation, property prices and demand for labour, argues a growing army of economists.

A consensus seems to be forming that more drastic policy-responses are forthcoming, even though not everybody is on the same song sheet when it comes to the exact timing. Will China finally revalue its currency this year?

Economists suspect there will be a one-off large re-adjustment in the USD-peg, which, of course, will take most of the world by surprise. Such a move would probably come in combination with a widening of the RMB trading band against the greenback.

And there will be more restrictions for banks and for property investors. Plus interest rates will have to rise too.

It's probably no coincidence that, given these prospects, the Chinese share market is among the worldwide laggards this year. And commodity markets have already shown sharply increased volatility. Both elements are unlikely to change any time soon as Chinese policy makers will likely have their work cut out for them this year.

Meanwhile, commodity bulls are anxious to find out whether a sharp revaluation of the Chinese currency will translate into more demand as it will effectively make prices cheaper on a relative basis (vis-a-vis USD prices).

Expect more policy actions soon.

This story was originally written and published on Monday, 22 February 2010.

By Greg Peel

On Tuesday night the US Treasury auctioned US$44bn of two-year notes. Last night it auctioned US$42bn of five-year notes. Tonight it will auction US$32bn of seven-year notes. Commentators have long ago stopped noting that such sales amounts often break previous records.

Last week the US Treasury auctioned US$40bn of three-year notes, US$25bn of ten-years and US$16bn of thirty-years. Indeed, every month the US Treasury auctions off billions upon billions in bonds, notes, and shorter dated bills. This is the mechanism by which the US funds its massive fiscal and current account deficits. America goes cap in hand to the world, seeking support for the maintenance of a lifestyle to which America has become accustomed. Since around 1975, net US debt has skyrocketed, far, far beyond the growth rate of US household income. This is not debt for which the principal is ever going to be returned – ever. Only interest payments will be forthcoming.

And the world laps it up. Or at least, the world has been lapping it up so far. Everyone across the globe wants to sell goods and services into the biggest consumer market on the planet, and the only way this can be done is to lend those consumers the money to spend. It's a vicious circle which cannot be broken because a point of no return was passed decades ago. Cut off America, and you cut off your own export receipts and your own lifestyle.

Obviously the whole system is no better than a house of cards, or as others have suggested, the world's biggest Ponzi scheme. The house nearly collapsed in 2008, but given the vicious circle meant everyone would be a loser, the simple solution was to print enough "paper" money to counter the deflationary forces of economic recession. And here we are.

The GFC has brought into focus the need to address the "global imbalance" which in simple terms can be defined as China, Germany and Japan selling goods to the US on credit while saving all the receipts. Those receipts have to be parked somewhere safe, and what better safe haven is there than in debt issued by the government of the economy which is still bigger than the other three put together? And that's before we talk about who has the most bombs.

So keen is the world, and the domestic US investment market, to park its funds in this safe haven that recently US one-month Treasury bills fell to a negative nominal yield. That means even ignoring inflation, investors are paying America for the right to lend America money. How will the globe ever be rebalanced when this sort of attitude prevails?

One alternative which was previously favoured by the creditor nations post-GFC was to start diversifying out of US-only investments and to spread funds around into other sufficiently safe havens including IMF bonds, euro-denominated assets and gold. Gold provides no interest payment, nevertheless, and is volatile in price. There is no eurozone bond, and now Greece has thrown a spanner in the works of any euro-denominated assets being some sort of safe haven. IMF bonds are fine but limited, and they still have a 40% US dollar weighting.

So over there's a rock, and over there's a hard place. And the conundrum is made even rockier and harder by the fact that any full-scale withdrawal of credit to the US would result in existing investments being trashed in value. Damned if you do…

Another major problem creating global imbalance is China's pegged currency. While Japan and Germany helped America into its endless credit cycle mess, China's non-floating currency opened up a whole new world of artificial spending opportunity for Americans. There has been no one more vocal in its desires to diversify away from its massive US investments than China, but to do so is to risk both wiping out the value of its investments to date and derailing Chinese economic growth.

But Chinese economic growth would also be derailed if the renminbi was allowed to float, because suddenly China's US investments would be worth far less in its own currency and Americans would no longer find Chinese goods "cheap". Post-GFC, China has not been selling as much to the US as previously so it is not buying quite the same amount of US debt, but China still has to buy at least some US debt. Euro investments are now off the cards, and China produces enough of its own gold, it would seem. It has already loaded up on what IMF bonds are available.

China has more recently been exploiting a different way to diversify its investments while still preventing a US dollar collapse, and that is simply to cut out the middle man and buy US dollar-denominated commodities – iron ore, copper, you name it. And China has been cutting out further middle men by actually buying into the companies that produce those commodities, which it has been doing across the length and breadth of the earth including in Australia.

There is only so much iron ore and copper etc China can buy nevertheless, particularly at a time when the US and West in general are no longer spending like mad on Chinese manufactured goods. Another earlier form of diversification was for China to buy not only US Treasury bonds, but US state and municipal bonds as well.

But in the latter case, Greece changed the picture, it is believed. China instructed its state investment body to withdraw from lower-rated debt and stick only to higher rated Treasury debt for fear that the building European crisis would serve to blow out credit spreads on less all reliable economies, including those of US states and municipalities. [See China Battening Down The Hatches].

Which means China is once again buying only US Treasuries. This should be some sort of comfort for America, except for one problem. It would appear China, and the world, is beginning to see the US as too much of a risk out to any length of time. In the aforementioned Treasury auctions, while foreign central bank demand for up to two-year US debt remains strong, demand any further out is waning, and waning fast. If America cannot find backers to support its printed money out to time – time for which the US deficit is expected to go on and on – then the next risk is hyperinflation, Zimbabwe-style.

The world has become tired and nervous of buying more and more longer-dated US debt. The more it buys, the more becomes available. Foreign participation rates in longer-date US Treasury auctions has been dropping alarmingly. Greece is not the only problem nation. All the world has managed to do post-GFC is take all the debt burden out of the private sector and re-establish it in the public sector. We no longer fear investment banks going down, we fear countries going down.

Another reason why China in particular would want to re-concentrate its US investments into short-date debt is because very soon China will revalue its currency by an expected 5% in order to ease off its runaway economy. This immediately has the effect of devaluing US investments, but the shorter the date the lesser the valuation impact. The same goes for wider credit spread debt such as state and municipal debt.

But there is more to the story. China has clearly been selling US bonds in recent months, rather than just not buying them. Is this just part of switching into shorter dates or is there a more insidious agenda behind the sales?

China is now in a position of considerable global power. The US may still be the world's undisputed superpower, but China holds the kryptonite. For if China was to call in its US marker (sell all its US bonds) the US economy would collapse. Mind you, the result would be largely internecine, given China's surplus and export market would be wiped out, but China is not beyond flexing a bit of muscle and letting the US know just who is holding the cards here (pardon the mixed metaphor).

And China has two areas of ongoing frustration. They're called Taiwan and Tibet, and from an imperial perspective China believes it holds unalienable rights over those "countries". China gets very upset when world leaders meet with China's "enemy" in the Dalai Lama, which President Obama did last week, and was previously furious when America agreed to sell arms to Taiwan.

On the Taiwanese front, China holds considerable power. As soon as arms contracts were announced between Taiwan and the likes of Boeing, for example, China threatened to stop buying Boeing aircraft. Given over 50% of China's airline fleet is made up of Boeing planes, and the total is rapidly growing, Boeing found itself with a difficult decision to make.

Meetings with the Dalai Lama have not elicited quite such a direct response, but suffice to say the London Telegraph has pointed out that the day Obama met with the Tibetan leader the (Communist) China Daily praised moves by the Chinese authorities to "slash" holdings of US debt.

And we won't even begin to speculate on Google's problems, general computer hacking and intellectual property theft.

What is of concern here is that a political rift is building which goes far beyond sensible notions of risk diversification. Tensions between the US and China are mounting. Just how much damage is China prepared to inflict via US debt markets before the mutual ramifications outweigh a simple show of force?

Notes the Telegraph's Ambrose Evans-Pritchard, "China and America are locked together by fate. Any petulant action by either side involves a degree of 'mutual assured destruction'. But sometimes in politics – as in life – emotion flies out of control".

Investors jumped into the Aussie market Monday morning, sending the broader indices 0.6% higher at lunch. The result came despite a flat lead from Wall Street on Friday and subdued volumes following a hectic reporting season, which barring a few laggards, wrapped up last week.

In economic news, the TD Securities-Melbourne Institute inflation gauge rose by just 0.1% in February. The previous two months the inflation measure had increased 0.8%.

The All Ords was up 26.2 to 4,677.3, while the ASX/200 added 27.8 to 4,665.5. Over 800 million shares worth around $2.2 billion had changed hands.

BHP Billiton was the only major player to lose ground. Its shares dipped 20c, or 0.5%, while the Materials and Resources sector rose 0.3% overall.

Rio Tinto, the world’s third largest miner, was 98c, or 1.4% higher at $71.48. The miner said it had increased its interest in Canada's Ivanhoe Mines to 22.4% following the acquisition of a further 15 million shares.

OZ Minerals made strong ground, with its shares jumping 5.8% to $1.10.

Gold miners Newcrest and Lihir were both 2.6% stronger at $32.17 and $2.72 respectively. 

Meanwhile, Alumina spiked 4.3% to $1.57. The price for aluminium rose 2.4% in London last Friday.

The Banks and Financials sector rose 0.3%. ANZ and Westpac gained ground among the big four banks, up 1.8% and 1.1% respectively.

CBA and NAB were little changed.

The insurers were weak, with Suncorp-Metway and AXA Asia Pacific down 2% each.

IAG bucked the trend putting on 12c to $4.07.

Investment bank Macquarie added 1.4% to $45.90.

The Energy sector was 1.3% higher. Woodside and Oil Search advanced 0.4% each, while Origin and Santos’s gains were more pronounced. Their shares rose 28c, or 1.7% to $17.09 and 17c, or 1.3% to $13.13 respectively.

Aquila, Riversdale Mining, Beach Energy and AWE were all between 4% and 4.5% higher.

The Property Trusts were 0.1% lower, with most stocks doing very little. The exception was Lend Lease, which slumped 2.3% after completing the institutional component of its $434 million capital raising.

The Consumer Discretionary sector was 0.8% higher. Retailers were mixed, with Harvey Norman easing 5c, or 1.3% to $3.78, while David Jones added 10c, or 2.1% to $4.84.

Among the gamers, Aristocrat and Tatts were up 1.9% and 1.7% to $4.31 and $2.44 respectively.

Seven led the way higher for media stocks, putting on 27c, or 3.7% to $7.61.

The Consumer Staples sector rallied 1.7% on the back of 1.5% and 2.8% gains to heavyweights Woolworths and Wesfarmers.

Toll bounced back from very heavy selling in the last few days last week. Its shares surged 39c, or 5.7% to $7.19 as the Industrials sector rose 1.4%.

Brambles added 17c, or 2.4% $7.11, while engineering firms Downer EDI and UGL were both 1.9% stronger.

Healthcare climbed 1.5% on the back of the sector’s largest company, CSL, adding 73c, or 2.1% to $35.12.

Around the region, the Nikkei 225 was up 45.0 to 10,171.0, while the NZSE50 added 11.5 to 3,167.6. The Straits Times Index rose 11.5 to 2,762.4.

Spot gold was trading at US$1,117.98 per ounce, while the Aussie was buying US$0.9000.

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Rio to increase stake in Canada's Ivanhoe
Rio Tinto said it has agreed to acquire 15 million shares in Ivanhoe Mines Limited for C$244.7m. The mining giant said the acquisition would increase its ownership in Ivanhoe Mines by 2.7% to 22.4%.

At noon, Rio Tinto shares were up 60c to $71.10.  

Westpac operates as single ADI
Westpac Banking Corporation said today that it commenced operating as a single authorised deposit-taking institution (“ADI”). Australia’s second largest bank by market capitalisation said in moving to a single ADI all the assets and liabilities of St.George Bank Limited have become those of Westpac’s.

At lunch, Westpac shares were up 22c to $26.35.

AGL to construct Macarthur Wind Farm
AGL Energy said it has entered into conditional arrangements for the construction of Macarthur Wind Farm in south-west Victoria under a joint venture with New Zealand’s Meridian Energy. The company said the agreement follows the Federal government’s announcement last week of proposed changes to the operation of the Renewable Energy Target scheme.

At midday, AGL shares were up 16c to $14.53.

Lend Lease raises $434m, more to come
Lend Lease said it has successfully raised $434m from the institutional component of its fully underwritten equity raising announced last Thursday. Existing shareholders subscribed for over 87% of their entitlements available under the Institutional Entitlement Offer.

At lunchtime, Lend Lease shares were down 24c to $9.10.

Clive Peeters profit slumps to just $424k
Clive Peeters squeezed out a modest $424,000 profit in the six months to 31 December, despite posting revenue of $252m. The profit figure was down 57%, while revenue dipped just 5% from the previous corresponding period.

At noon, Clive Peeters shares were down 4c to 24c.

Extract appoints Leslie as CEO
Extract Resources announced the appointment of former Rio Tinto board member Jonathan Leslie as the Group’s CEO with immediate effect. The uranium explorer said Mr Leslie was on the board of Rio Tinto PLC for nine years and CEO of two of Rio Tinto’s major product groups.

At lunch, Extract shares were up 15c to $7.40.

Extract Resources Limited (EXT) announced the appointment of former Rio Tinto PLC board member Jonathan Leslie as the Group’s CEO with immediate effect. The uranium explorer said Mr Leslie was on the board of Rio Tinto PLC for nine years and CEO of two of Rio Tinto’s major product groups.

Extract said Mr Leslie spent four years responsible for Rio Tinto’s worldwide uranium sales into the Far East and Asia before being appointed as managing director of Rössing Uranium where he developed close relationships with the Namibian government and related agencies.

The company said that more recently, Mr Leslie served as executive chairman for the major AIM-listed mining company, Nikanor plc, formed to develop the KOV copper/cobalt project in the Democratic Republic of Congo.

Prior to his role with Nikanor, Mr Leslie was CEO of Sappi Limited, from 2003 to 2006.

Extract’s chairman, Stephen Galloway, said he was delighted to announce the appointment during the stage in the company’s evolution from mid-cap explorer to a tier-one uranium asset developer.

”Jonathan brings a wealth of knowledge and global leadership,” Mr Galloway said.

”The networks developed by Jonathan in banking and finance, and thorough understanding of uranium mining, markets and customers, will add tremendous value to Extract as the company moves towards full production of the Rössing South deposit.”

As at 1139 AEDT, Extract shares were up 34c to $7.59.

Lend Lease Group (LLC) said it has successfully raised $434 million from the institutional component of its fully underwritten equity raising announced last Thursday. Existing shareholders subscribed for over 87% of their entitlements available under the Institutional Entitlement Offer.

The second part of the equity raising, for retail investors, will open on Wednesday, March 3 and close at 5pm (AEDT) on Wednesday, March 24, the property group said.

The second part is intended to raise $305 million, with a total equity raising intended to be around $806 million.

At 1058 AEDT, Lend Lease shares were around 18c, or 1.9% higher to $9.52.