Shares rise, oil price up on Middle East fears, more bad US data on the way: Economy roundup

The first trading week of 2009 has started on a positive note, with Australian stocks climbing 1.3% in early trade, thanks largely to higher oil and metals prices.

James Thomson

The first trading week of 2009 has started on a positive note, with Australian stocks climbing 1.3% in early trade, thanks largely to higher oil and metals prices.

The benchmark S&P/ASX200 index rose 0.7% or 27.7 points, to be 3741.5 at 12:10 AEDST. The market took a lead from strong trade on Wall Street on Friday night, when the S&P500 index jumped 3.08% as investors greeted the New Year with optimism.

The rising sharemarket helped push the Australian dollar to US71.5c this morning, with currency traders predicting the local currency could go higher in coming weeks.

BHP Billiton shares rose by 3.6% this morning, while News Corp shares jumped 5.2%. The biggest rise as recorded by miner Pan Australian Resources, whose shares jumped more than 94% after the company announced it had successfully put new funding arrangements in place.

Oil price rises 4%

Australia’s market was helped by a 4% rise in the price of oil as fears grow about rising tensions in the Middle East after Israel’s invasion of Palestine. There are also concerns about the growing fuel crisis in Eastern Europe, where Russia has shut off natural gas supply to its neighbour Ukraine on Thursday after a dispute about contracts.

Predicting exactly where oil prices might go next isn’t easy. Oil prices fell 54% over the course of 2008 from $US95 to $US44 a barrel, but spiked to hit a record high of $US147 in July 2008.

Bracing for bad data

Whether the oil price keeps rising could depend a lot on the data coming out of the US. On Friday it was revealed that US factory activity had fallen to a 28-year low in December, with the manufacturing jobs gauge hitting the lowest level since 1982 and manufacturing prices index falling to the lowest point since 1949.

Later this week the first big US companies will begin reporting their fourth quarter results and analysts are worried the news will be bad. Energy giant Chevron, retailer Bed Bath & Beyond Inc and agricultural products leader Monsanto will all report this week.

“A lot of companies have been really quite quiet about how their quarter is shaping up,” Marc Pado, US market strategist at Cantor Fitzgerald & Co, told Reuters. “We’re likely to see earnings that are going to contain big write-downs, especially from financials. We’re bracing for it.”

Investors will also nervously watch how President-elect Barack Obama’s economic stimulus plans are progressing, after warnings that Congress could block some of his proposed measures.