Morning finance update

The US ADP private sector employment report supported the view that the US economy was picking up|
|steam. The private sector added 187,000 jobs in January following on from the downwardly revised|
|247,000 jobs added in December. The January result was well ahead of expectations. The non-farm|
|payrolls report on Friday is expected to show a rise of 145,000 jobs for January. |
|European shares edged higher on Wednesday. Mining shares posted solid gains in response to |
|higher metal prices. The STOXX Europe 600 Resources index gained 2.1pct as copper prices |
|remained near record highs. In London, banks found good support on improved investor sentiment. |
|Standard Chartered rose 1.7pct. The FTSEurofirst index rose by 0.2pct with the UK FTSE up 1.6pct|
|and the German Dax was higher by 1.5pct. |
|US sharemarkets were mostly unchanged on Wednesday with stocks managing to hold on to the |
|previous sessions sharp gains. The strong employment data was tempered by the fresh clashes |
|between authorities and citizens in Egypt. With an hour of trade, the Dow Jones index was up by |
|14pts or 0.1pct with the S&P 500 down 0.1pct and the Nasdaq was higher by 4pts or 0.2pct. |
|US treasuries fell again on Wednesday (yields higher). Better-than-expected economic data |
|supported a switch away from safe-haven assets. The US treasury department said it will auction |
|$72 billion in notes next week – in line with expectations. US 2yr yields rose by 5pts to |
|0.66pct and US 10yr yields rose by 4pts to 3.49pct. |
|The US dollar strengthened against major currencies In European and US trade on Wednesday. The |
|Euro fell from highs near US$1.3855 to US$1.3775, and was near US$1.3795 in late US trade. The |
|Aussie dollar fell from highs around US101.25c to US100.55c, and was around US100.80c in late US |
|trade. And the Japanese yen eased from 81.40 yen per US dollar to around JPY81.80, and was near |
|JPY81.60 in late US trade. |
|US crude oil prices pared early gains following the rebound in the US dollar. The release of the|
|weekly inventory data also pressured oil prices. US crude stockpiles rose 2.6 million barrels |
|last week as refiners rebuilt stockpiles following the sharp drawdown late last year. The Nymex |
|crude oil contract rose by US9 cents (0.1pct) to US$90.86 a barrel. London Brent crude fell by |
|US21c to US$101.53 a barrel. |
|Base metal prices mostly held on to the previous session’s gains on the London Metal Exchange. |
|However the recovery in the US dollar did pressure commodities in late trade. Aluminium fell |
|1.2pct while Lead gained 0.5pct. And the gold price eased on Wednesday as the US dollar |
|strengthened. The Comex gold futures price lost US$8.20 an ounce to US$1,332.10. |
|Ahead: In Australia, data on building approvals and trade data is released. In the US, the ISM |
|non-manufacturing index and factory orders are released.

Australian daily finance update news bulletin

The data out of the US continues to impress. Personal income and spending
numbers out last night show the US consumer is back. Incomes rose 0.4% in
December, while spending rose 0.7% – the savings rate, meanwhile is at a
comparatively elevated 5.3%. In the manufacturing space, data is no less
promising, with manufacturing surveys for Chicago, Dallas and Milwaukie all
showing robust activity.

Now this is all great news and helped underpin a bid in the equity space.
Admittedly this bid is fading into the close, but at the high the S&P500
was up 0.8% (currently 0.4% at 1281). BY sector, energy stocks were the key
outperformers, boosted by another 3% gain on WTI ($92.17, Brent $100) and
strong earnings from ExxonMobil. Basic materials and industrials also
outperformed, with consumer goods, telecommunications and consumer services
weighing heavy. The Dow otherwise was up 31pts (11853), the Nasdaq rose
0.3% (2693) while the SPI was flat (4727).

In FX land, both EUR and Sterling got a decent boost from some higher
European inflation data, especially Sterling which was up 148pips to
1.6007.  The market is increasingly taking the view that rates on hold, is
a luxury neither the ECB nor BoE can afford. EUR rose 85pips to 1.3680
after euro zone inflation rose to 2.4%y/y in January from 2.3% (remember
the ECB targets 2% or below). Otherwise AUD was up 40pips to 0.9961, while
JPY was unchanged at 82.05.

In contrast, there was little action in debt markets. US treasury yields
are currently up between 2-4bp with the 2,5 and 10yr trading within a
4-11bp range to be at 0.57%, 1.95% and 3.37% respectively. Aussie futures
are down 1-3 ticks on a 4 tick range with 3s at 94.93 and 10s at 94.47.

Bits and pieces otherwise. Canadian GDP rose by 0.4% in November to be 3%
higher annually. In Germany, retail sales fell by 0.3% in December after a
1.9% fall in November. Note that there are rumours flying around that
Greece and relevant parties are discussing some kind of ‘Brady Plan’ like
deal.  Basic gist is that bond holders would take a haircut and the
maturity of Greek loans would extend to 30yrs. The Greek government
confirmed they are discussing plans to extend the maturity of loans, but
denied there would be a restructuring or any haircut applied to bond
holders.   Note that over the last week, the ECB bought no bonds, the first
time since October, and a great sign that debt concerns are easing. Also of
interest, US corporate bond sales apparently are at a January record, not
surprising with such a low cost of funding.

So today we can look forward to the RBA’s rate announcement (1430) although
no one is expecting any changes from the Bank today. To be honest, I have
no sense of what the RBA Board will make of recent events, but I would be
genuinely stunned if they are as dovish as the market. I would hope that
they can see sense, see past all the PR rubbish and set policy with an eye
to the medium term national interest. As I highlighted in my piece
yesterday, global growth is accelerating we know this, look at the recent
data flow, especially out of the US.

We know that global inflation is rising, already in Europe and the UK it is
above the band – it is rising sharply in the emerging world. In the
domestic space growth is robust – ok credit growth is sluggish and there
are questions over retailing.  But this is the whole point of the exercise
– credit growth should be subdued, likewise consumer spending. With
interest rates barely above average, barely even above neutral, I think it
is ridiculous to sincerely expect the RBA to just sit around and a wait for
a consumer spending rebound (not that I think there is a lot of reliable
evidence that it soft) or a pick up in credit growth – as if these were
somehow desirable outcomes. Similarly, we can’t just expect them to sit
around in fear that Europe will disintegrate or China implode, while global
growth, meanwhile, is so strong.

Whatever the case in the retail space it is clear that high interest rates
are not the problem. Ditto credit.   Interest rates are not that high, a
fact plain to see. So with the fantasy of a global double dip over, we are
left with the reality of strong global growth, rising global inflation and
a commodity boom; all thrown in with the most stimulatory monetary policy
humanity has ever seen – which by the by doesn’t look like its going to
change any time soon.  It’s a lay down misere, they should hike.

Just prior to that NAB release their business survey for December, the ABS
issue Q4 house prices and then tonight we get US construction activity and
the ISM index.

Have a great day..

ATO Update – reposted by andre di cioccio

PAYG instalments – making annual elections online Did you know annual pay as you go (PAYG) instalment elections can be submitted electronically? This means no more waiting on the phone! You can: access an e-form on our website by searching ’3133′ submit requests for up to 20 clients at once partially complete the form and submit it later (but before the due date for elections). The e-form will: generate a receipt number followed by an email confirmation within 48 hours of transmission issue a confirmation letter to the client’s postal address when the form is processed. For more information about PAYG instalment elections via e-form, refer to Choosing to pay an annual pay as you go (PAYG) instalment. PAYG instalments – discussions with selected tax professionals and business operators During October 2010, we will be contacting selected tax professionals and business operators in the $2 million to $100 million annual turnover range, to discuss instances where the amount of PAYG instalment received for the quarter under review, is significantly different to the amount of PAYG instalment received in a previous quarter. Businesses should review their PAYG instalment rate each quarter to ensure they are not paying more than is necessary. For more information, refer to How to vary pay as you go (PAYG) instalments. Lodgment deferrals for quarterly BAS – do you lodge electronically? Did you know that if you lodge your clients’ quarterly business activity statements (BAS) electronically, you get a four week electronic lodgment and payment concession? Quarterly BAS lodged electronically have a lodgment and payment concession of four weeks for quarters 1, 3 and 4 and have until 28 February for quarter 2 lodgments. This means that if you lodge electronically, the quarter 1 BAS is due for lodgment and payment by 25 November 2010. If you are experiencing hardship and need further time to lodge, you need to apply for a deferral. For more information, refer to Lodgment Program 2010-11 – details of the program – Activity statements. Progress report 9 – income tax returns since 1 July 2010 Since 1 July we have received 7.28 million returns and have issued refunds worth nearly $15.15 billion. The ATO’s regulation of SMSFs – the compliance program, specific risks and other areas of focus Address by Neil Olesen, Deputy Commissioner of Taxation, to the ICAA SMSF Conference in Sydney on 23 September 2010. Super funds and taxation: working together for effective compliance Address by Stuart Forsyth, Assistant Commissioner Superannuation, in Brisbane on 15 September and in Melbourne on 17 September 2010. Tax help for small business in Bundaberg and Hervey Bay regions in Queensland and Yarra City Council Victoria during October 2010 We invite small business operators to attend free one-on-one information sessions to help them stay on track with their tax and super obligations. Bookings are essential. System maintenance and issues This page contains scheduled downtime and details of issues currently affecting our online services. Keydates for registered agents – September September key dates for registered agents. Foreign exchange rates List of daily, monthly and annual foreign exchange rates. Legal Database updates The latest updates to the Legal Database. ATO data match to identify people avoiding tax obligations We continue to identify people who deliberately under report income or participate in the cash economy to hide income and evade their tax obligations. Excess contributions tax – applying to have your contributions disregarded or reallocated Information about applying to have contributions disregarded or reallocated. SuperUpdate September to November 2010 SuperUpdate provides news and information for those working in the superannuation industry. Non-Profit News Service No. 0299 – Senate Economics Legislation Committee releases report on public benefit test The Senate Economics Legislation Committee has released its report on Tax Laws Amendment (Public Benefit Test) Bill 2010.