BHP's Kloppers Hesitant About Recovery

Last night the US Treasury yield curve moved to its steepest level on record with the spread between 10- and two-year note yields gapping to 275 basis points, beating a previous peak set in 2003. This is partly due to the extra bonds being issued and is an indication as to what is likely to occur here. Supply is only one factor though with fears of future inflation being a more powerful force.

Also last night US existing home sales rose by 2.9pct in April against expectations of a 2pct rise. The stock of unsold homes rose by 8.8pct to 3.97million - the highest reading since November. At the current sales pace it would take 10.2 months to clear the existing stock of homes on the market for sale, up from 9.6 months.

In Australia, BHP Billiton's chief executive, Marius Kloppers, is urging caution about signs of improvement in the global economy, warning that any recovery is likely to be slow and protracted.
"I wish I could say that 2008 was the end of it," Mr Kloppers said. "The best we can say in the medium term is that conditions remain uncertain," he told a Minerals Week function in Canberra.

For Mr Kloppers and the global mining industry, the key question is whether the increase in industrial production in China and - eventually - the developed world, is coming merely from factories restocking their goods, or if it reflects more resilient growth in demand.

"I just want to caution that the current buying levels in China are a combination of restocking and underlying demand," he said.

Figures in Australia released yesterday showed that construction work eased from record highs in the March quarter, with weaker private sector activity
offsetting a sharp lift in public sector work. Construction work done eased by 3.7 per cent. Order books eased further in the March quarter. Work yet to be done was down 4.4 per cent on a year ago.