Greek Downgrade Drags Australian Stocks Down

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

Australian dollar fell today, snapping its five day against the greenback and its highest rate since May, after the central bank said Europe

Greek Downgrade Drags Australian Stocks Down

[R]6:00 PM Sydney, Australia – Stocks in Australia declined marginally after Greece was downgraded to junk. BHP signs a landmark mineral development with Liberia. The RBA releases minutes of meeting held on June 1. BG Group Plc joins other miners to take time till year end to decide on investment in Australia. Asciano Group secures another 10.9 million tons transport contract from Anglo American in Queensland.[/R]

ASX 200 index in Australia decreased 0.01% or 0.50 to 4,505.00 and of the stocks in S&P ASX 200 index, 116 increased, 70 declined and 14 were unchanged.

Australian dollar fell today, snapping its five day against the greenback and its highest rate since May, after the central bank said Europe’s debt crisis stoked by the downgrading of Greece, would inevitably weigh on global economic recovery and growth. It traded at 85.28 U.S. cents as of 4:28 p.m. in Sydney today.

The Reserve Bank of Australia’s decision to return borrowing costs to average levels, as endorsed at the recent G-20 meeting, has in retrospect given the policy makers, time to pause and consider the current crisis of Europe, says the minutes of their recent meeting on June 1.

“In considering the setting of monetary policy, we the members have noted that the situation in Europe has deteriorated significantly,” RBA said in minutes of their meeting on June 1, released in Sydney today.

BHP Billiton Ltd, the miner, has signed a $3 billion landmark mineral development agreement with Liberia, setting out taxes, duties and other trade terms for the development of four iron ore deposits, the Australian newspaper reported.

“The Liberian cabinet has given its approval to the deal and it will now be put before the National Legislature for ratification,” said Richard Tolbert, Chairman of the National Investment Commission, in Monrovia on June 11.

BHP’s push into Liberia comes after the debate around the government’s proposed resources super profit tax continues to fuel uncertainty about its impact on projects in Australia.

BHP’s rival Vale SA, the world’s largest iron ore producer, is driving borrowing costs down by reducing its exports to China. Vale, which had 45% of its first quarter revenue coming from China, is trimming its shipments to China after steel prices fell by 10% from April 15 high due to governmental moves to curb property bubbles.

The yield on Melbourne-based BHP Billiton’s $1.75 billion of 2019 notes climbed six basis points since May 14 to 4.22%. BHP is rated A1 by Moody’s Investors Service while it rates Vale as Baa2.

U.K.-based energy company, BG Group Plc, joined a host of other companies today to announce that they will arrive at a final investment decision on their Queensland coal seam gas to LNG venture, if they get acceptable fiscal terms and environmental approvals.

This was stated by the company’s Managing Director, Catherine Tanna after a meeting with Australia’s Prime Minister Kevin Rudd, in a statement distributed in Canberra today.

ASX Movers

iSOFT Group Limited led gainers in the S&P ASX 200 index with a rise of 20.4% followed by Biota Holdings Limited 12.8%, Gunns Limited 10.8% and Ausenco Limited 8.1%.

Australian Worldwide Exploration Limited led decliners in the S&P ASX 200 index with a loss of 4.2% followed by Sundance Resources Limited 3.8%, APN News and Media Limited 3.1%, St Barbara Limited 2.7% and St Barbara Limited 2.7%.

Other Movers

Asciano Group rose 0.9% to A$1.60 after the ports and rail operator announced that it has executed a long term, take or pay contract with Anglo American Metallurgical Coal Pty Ltd for the movement of a total of 16.5 million tons per annum of coal in Queensland commencing January 1, 2012.

Australia and New Zealand Banking Group Limited closed unchanged at A$23.04 after the lender completes the acquisition of the RBS''s retail, commercial and private banking businesses in Indonesia.

Gazal Corporation Limited increased 2.6% to A$1.54 after the clothing maker expects profit before tax for 2009/10 to be above the prior year due to improved margins and reduced costs.

The GPT Group climbed 3.9% to A$2.89 after the property trust stock was upgraded to “neutral” from “underweight” at JP Morgan Chase & Co.

iSOFT Group Limited surged 20.4% to A$0.29 after the Australian-British health information software developer announced that Gary Cohen has stood down as Executive Chairman in order to allow him to fully focus on his role as Chief Executive Officer.