Inflation in Australia on the Rise

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
28 Apr, 2010
New York City

The benchmark index in Australia declined 1.2% after world markets dropped. A downgrade of Greek and Portugal debt lifted bond yields to record high and the euro fell nearly 1%. Macarthur Coal third quarter sales surge 50%. In Sydney trading banks declined.

[R]3:00 AM New York, 7:00 PM Sydney – The benchmark index in Australia declined 1.2% after world markets dropped. A downgrade of Greek and Portugal debt lifted bond yields to record high and the euro fell nearly 1%. Macarthur Coal third quarter sales surge 50%. In Sydney trading banks declined.[/R]

The benchmark index in Australia fell 1.2% as fears of euro zone contagion dragged world markets lower.

Standard & Poor’s yesterday cut Greece’s credit rating to junk and reduced Portugal’s by two notches. The rating agency also estimated that only 30% of debt is likely to be repaid.

The Australian dollar advanced for the first time in three days on speculation that accelerating inflation will prompt the Reserve Bank of Australia to increase interest rates next week. However, concerns about Greece aren’t increasing borrowing costs in Australia, said Guy Debelle an RBA assistant governor.

Australia’s inflation rate almost doubled in the first quarter to 0.9% according to the Reserve Bank of Australia.

Chi-X Global Inc., an electronic- trading-platform provider, is aiming to start operating in Australia by October, said its COO Peter Fowler in an interview in Sydney today.

The Australian senate voted in March paving the way for real time trading on licensed markets to Australian Securities and Investments Commission.

Australia’s Inflation Rises 0.9% in March

Australian Bureau of Statistics reported today that the country’s consumer price index gained 0.9% in March from 0.5% in the three months to December.

The CPI advanced 2.9% in March from the same period a year ago.

Gains were for automotive fuel 4.2%; pharmaceuticals 13.3%; deposit and loan facilities 3.4%; vegetables 10.3%; electricity 5.9%; house purchase 1.2% and hospital and medical services 2.9%.

However, increases were pared by furniture 4.6%; fruit 5.7%; domestic holiday travel and accommodation 2.3%; audio, visual and computing equipment 5.9%; men''s outerwear 6.7% and children''s and infants'' clothing 9.9%.

Greece Debt Downgraded to Junk Status

Ratings agency Standard & Poor overnight downgraded Greece debt to junk, prompting the euro to drop as low as 1.3277 against the U.S. dollar.

Greece’s debt rating was slashed to BB plus from BBB plus, which is the highest junk rating.

Bank of Greece has projected that the country’s public-sector debt burden will rise to 130% of GDP by 2014 from the government estimate of 120.6% for 2010.

Portugal’s debt was lowered by two notches and investors are speculating that Portugal may need as much as 40 billion euros in emergency assistance and Spain is scheduled to refinance 225 billion euros of bonds this year.

S&P forecasts that Portugal will struggle to stabilize its high debt ratio until 2013.

“The downgrade results from our updated assessment of the political, economic and budgetary conditions that the Greek government faces in its efforts to put the public debt burden onto a sustained downward trajectory,” said S&P credit analyst Marko Mrsnik.

Macarthur Q3 Sales Rise 50%

Macarthur Coal said sales rose 50% to 1.23 million tons from the same period a year ago on rising demand of LV PCI on recovery in international steel markets and growth in sales to China.

Total production in the period increased 13.9% to 1.18 million tons from a year earlier.

However, the company didn’t give an update on the planned $4.07 billion takeover by Peabody Energy which is expected to complete its due diligence by May 5.

ASX 200 index in Australia decreased 58.30 or 1.19% to 4,821.70 and of the stocks in S&P ASX 200 index, 13 increased, 179 declined and 8 were unchanged.

ASX Movers

Murchison Metals Limited led decliners in the S&P ASX 200 index with a loss of 8.4% followed by Mirabela Nickel Ltd 5.4%, Eastern Star Gas Limited 5.0%, Biota Holdings Limited 4.7% and CuDeco Limited 4.6%.

Nufarm Limited led gainers in the S&P ASX 200 index with a rise of 2.2% followed by CSL Limited 2.1%, Charter Hall Group 2.0% and Virgin Blue Holdings Limited 1.7%.

Other Movers

BHP Billiton plc decreased 2.3% to A$41.02. The mining company was designated the preferred builder by Queensland state government for construction of a new coal terminal at Abbot Point as it beefs up its exports to steelmakers, according to a Reuters report.

Centennial Coal Company Limited fell 3.5% to A$4.36 after the company’s stock was downgraded to “hold” from “buy” by analysts at Royal Bank of Scotland Group Plc.

Commonwealth Bank of Australia slipped 0.8% to A$57.69.

Lend Lease Corporation Limited fell 0.9% to A$8.55. The developer was upgraded to “buy” from “neutral” by UBS AG.

Rio Tinto Limited declined 2.7% to A$74.27.

West Australian Newspapers Holdings Limited slipped 3.2% to A$7.78 after the publisher was downgraded to “sell” from “neutral” by UBS.

Whitehaven Coal Limited dropped 3.1% to A$5.46. The company reported a 12% rise in coal production and 4% increase in coal sales for the March quarter.

Woodside Petroleum Ltd the oil and gas producer dropped 1.8% to A$45.60.