Australian Index Drops 2.8%; China Worries

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
07 Jun, 2010
New York City

Stocks in Australia plunged nearly 3% and markets in Asia dropped at least 2% after the U.S. reported no jobs growth in the private sector. In addition, China further tightened rules for second home purchase lending, dragging commodities prices lower.

[R]6:00 PM Sydney, Australia – The Australian market index dropped sharply after the U.S. reported no private sector jobs gain in the last month and China tightened the property lending further. Commodities declined sharply in Asian trading. Perseus Mining Ltd completes A$32.8 million offering.[/R]

Stocks in Australia plunged nearly 3% and markets in Asia dropped at least 2% after the U.S. reported no jobs growth in the private sector. In addition, China further tightened rules for second home purchase lending, dragging commodities prices lower.

ASX 200 index in Australia decreased or 123.50 or 2.78% to 4,325.90 and of the stocks in S&P ASX 200 index, 7 increased, 191 declined and 2 were unchanged.

The Australian dollar fell today after Hungary unnerved investors with negative comments on Friday which were later retracted on Saturday. Hungary, not in the euro-zone has a flexibility to tackle its deficit unlike Greece that is part of the euro-zone.

Over the weekend in Busan, South Korea, G-20 finance ministers called for a Europe to shrink its budget deficits. U.S. Treasury Secretary Timothy Geithner after the meeting said that the world should not rely on the cash-strapped U.S consumer to drive growth but should instead stimulate their own internal demand.

The Australian Building Industry growth slowed in May even as it stayed above the expansion threshold, on a drop in demand in apartment blocks.

The index dropped to 53.2 from 55.8 points in April according to Australian Industry Group and Housing Industry Association in a survey released in Sydney today. The report showed that a gauge of apartment building tumbled 16.8 points to 42, while house building slipped 1.5 points to 57.7 in May.

Australia’s job advertisements climbed in May, a report by Australia and New Zealand Banking Group’s research released today in Melbourne showed.

Advertisements for jobs in newspapers and internet grew 4.3% from April, when they declined 1.2%, the report showed. While internet notices advanced 5%, the national vacancies advertised dropped 6.5%, the report said. The report also showed that newspaper notices grew in the most populous state of New South Wales, while it dropped in all others.

The New South Wales government’s proposed sale of power assets for an estimated A$8 billion will start its due diligence by possible buyers from July1. Since this review has a timetable of four months it could clash with the federal election. The Australian Financial Review, reporting this also said that some federal members want NSW Premier Kristina Keneally to reschedule the timetable.

ASX Movers

Perseus Mining Limited led gainers in the S&P ASX 200 index with a rise of 2.3% followed by Pacific Brands Limited 1.6%, AGL Energy Limited 0.7% and Australian Agricultural Company Limited 0.3%.

Carsales.com Ltd led decliners in the S&P ASX 200 index with a loss of 8.9% followed by Mount Gibson Iron Limited 8.0%, Murchison Metals Limited 7.8%, Awe Ltd 7.3% and Carnarvon Petroleum Limited 7.1%.

Other Movers

BHP Billiton plc fell 3.3% to A$36.62 after JP Morgan Chase & Co. fund Manager, Ian Henderson sold out a quarter of its stake in mining giants, such as BHP Billiton Ltd. and Rio Tinto Ltd., in the wake of the federal Government''s projected resources super profit tax, according to a report by Bloomberg.

Carsales.com Ltd dropped 8.9% to A$4.57 and Mount Gibson Iron Limited dropped 8.0% to A$1.49.

Pacific Brands Limited rose 1.6% to A$0.90.

Perseus Mining Limited rose 2.3% to A$1.93 after the company announced that it has completed its previously announced offering of 15 million ordinary shares at a price of A$1.94 a share for an aggregate of A$29.1 million, in a private placement managed by BGF Equities Pty Ltd.

Rio Tinto Limited, dropped 3.0% to A$65.55.