Australian Building Industry Expands

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
07 May, 2010
New York City

Australian stocks fall on Greek contagion. Australian construction activity rises in April. Reserve Bank of Australia warns of economic slowdown due Europe

[R]3:00 AM New York, 7:00 PM Sydney – Australian stocks fall on Greek contagion. Australian construction activity rises in April. Reserve Bank of Australia warns of economic slowdown due Europe’s debt concern.[/R]

The Australian stocks fell again while corporate bond risk rose the most in 17 months on concern the global economic recovery may be derailed by Europe’s debt crisis, increasing the demand for the safest assets.

The Reserve Bank of Australia warned of an economic slowdown as European debt crisis escalates. ‘The fiscal problems in Europe could intensify, prompting a retreat from risk-taking by investors along with a sharp slowdown in the world economy’ said the Reserve Bank of Australia in a quarterly economic report released in Sydney today.

‘There has been a problem specifically with Greece’s sovereign debt and Europe’s ability to step in and help and the markets have judged those arrangements to be inadequate’, said Australian Prime Minister Kevin Rudd in an interview with 3AW Radio today from Melbourne.

The Australian dollar gained against 14 of its 16 most traded counterparts on prospects policy makers of G-7 nations will act to stem the Greek contagion crisis.

Building industry in Australia expanded in April for the second month on rising demand for apartment blocks. The index jumped 4.8 points to 55.8 from March, as per survey by the Australian Industry Group and Housing Industry Association, released in Sydney today.

Alumina Ltd, the world’s biggest producer of alumina said it expects demand for the metal to go up by 10% this year on stronger consumption in China and India. Alumina is the main raw material for the manufacture of Aluminum Metal.

The market we operate in is still challenging but the outlook is improving, and is now significantly above the lows of 2009, said CEO, John Bevan in the company’s AGM toady.

The benchmark stock index fell 2.2% in Australia on a broad sell-off prompted by the continued fears over contagion effect of the Greek debt crisis.

An estimated A$70 billion has been wiped from the market this week and analysts are now betting the central bank might be forced to ease its monetary policy at its next board meeting.

Commodity stocks however trimmed losses as gold prices edged up 0.6% to $1,200 per ounce and crude oil prices rose 0.1% to $76.9 per barrel.

In Sydney trading ASX 200 Index declined 2.2% or 92.5 to 4,480.70.

Of the ASX 200 index stocks, 22 rose, 170 fell, and 8 were unchanged. Karoon Gas Australia led gainers in the index shares with a rise of 14.1% followed by Roc Oil jumping 8%.

Other commodity stocks gained. Lihir Gold climbed 1.04% to A$3.90 and OZ Minerals Ltd increased 0.5% to $1.04.

The Australian dollar increased 0.1% to 88.60 U.S. cents.

Australian Construction Activity Rises in April

The latest Australian Industry Group/Housing Industry Association Performance of Construction Index rose 4.8 points to 55.8 in April from a month ago on increased tendering opportunities and ongoing Federal Government support for school building work.

A reading above 50 shows expansion, while that below the figure shows contraction.

The apartment building sub-index grew 10.3 points, representing the second increase in activity for that sector in 27 months.

According to the report, stronger activity, together with a rise in new orders, saw employment growth at a four-year high.

Australian Industry Group Director Public Policy, Dr Peter Burn, said: “The house building sub-sector has now been in positive territory for nine consecutive months. It will need to continue to grow, together with apartment construction, to keep up with strong demand and to catch up on the shortage of supply that has helped push up prices. This will be a challenge in the face of recent interest rate rises.”

RBA Cautions on Europe’s Debt

Reserve Bank of Australia reported in its statement of monetary policy that the fiscal deterioration in Europe could drag global economic growth lower.

Concern over the Greek debt crisis and its contagion effect worsened yesterday when European Central Bank President Jean-Claude Trichet resisted pressure to take new steps to stem contagion from Greece.

“The fiscal problems in Europe could intensify, prompting a retreat from risk-taking by investors and a sharp slowing in the world economy,” said RBA.

Gainers & Losers

Karoon Gas Australia led gainers in the index ASX 200 index shares with a rise of 14.1% followed by increases in Roc Oil of 8%, in Eldorado Gold-CDI of 4.7%, in Kingsgate Gas of 3.8% and in Incitec Pivot Ltd of 2%.

Australia Infrastructure Fund led decliners in the ASX 200 index shares with a fall of 7.6% followed by losses in MacMahon Holdings of 6.8%, in Centennial Coal of 6.2%, in Western Areas NL of 5.8% and in Virgin Blue Holdings of 5.7%.