Sydney Rallies; Smaller Gains in Inflation

Chandrasekhar Atreya
26 Jul, 2010
New York City

Stocks in Australia started on a bright note and sustained the gains buoyed by optimism in U.S. and Europe. PPI rises less than expected due to falling cost of vehicles and meat. Pre-Election Economic & Fiscal Outlook released. NAB sells 100 billion yen of five-year Samurai bonds.

[R]6:00 PM Sydney, Australia – Stocks in Australia started on a bright note and sustained the gains buoyed by optimism in U.S. and Europe. PPI rises less than expected due to falling cost of vehicles and meat. Pre-Election Economic & Fiscal Outlook released. NAB sells 100 billion yen of five-year Samurai bonds.[/R]

Shares in Australia rose on the back of strong results from Wesfarmers, mild stress test results of European banks, and an optimism on Wall Street. Stocks opened higher and sustained the momentum throughout the day.

The ASX 200 Index gained 0.62% or 27.70 to close at 4,486.10 in Sydney today.

Australian producer prices rose less than expected last quarter thanks to falling costs for meat and vehicles, offering a ray of hope that inflationary pressures could be contained in the coming months.

The producer prices index gained 0.3% from the first quarter, when it gained 1%, the Bureau of Statistics said in Sydney today.

In the Pre-Election Economic and Fiscal Outlook released, the Treasury and Finance Departments estimated higher federal government deficit this financial year and stronger surplus in 2013, according to the update released today.

In a surprise change the Treasury forecast that the deficit for fiscal 2011 would grow to A$40.7 billion, about A$300 million tipped in an economic statement on July 14, but nonetheless smaller than the A$40.8 billion forecast on May 11.

The Association of Mining and Exploration Companies which represents junior to mid-tier miners confirmed yesterday it is preparing to re-launch its advertising campaign. Fortescue Metals Group chief and outspoken critic of the mining rental tax said he is prepared to invest in a campaign against the planned Mineral Resource Rent Tax.

National Australia Bank sold 100 billion yen of five-year Samurai bonds in two tranches, lead manager Nomura Securities said on Friday. The banker sold 67.3 billion in fixed-rate bonds and 32.7 billion in floating-rate debt.

The coupon for the fixed rate bonds was set at 53 basis points above yen swaps, while the rate for the floating-rate bonds was set at 70 basis points above three-month yen Libor.

West 49 has received an interim court approval from the Ontario Superior Court of Justice to proceed with a special shareholders meeting to consider the Canadian retailer’s proposed takeover by Billabong International.

Last month, clothing retailer Billabong said it would acquire West 49 in a C$83.2 million all cash deal, by offering C$1.30 for each West 49 share.

China’s energy demand, which has been driving higher Australian natural gas, coal and uranium for nearly seven years, has stepped up a notch or two.

Australia’s Labor government is planning to spend A$394 million over the next four years to replace old vehicles with energy-efficient units. The government also plans to introduce new mandatory emission standards for cars from 2015, the party said in a statement on July 24.

“The amount of carbon that we anticipate saving by getting 200,000 old cars off the road in favor of more fuel-efficient vehicles is estimated to be one million tons,” Gillard said at a news conference in Brisbane that was aired on Sky News.

White goods and furniture retailer Harvey Norman posted worse than expected fourth quarter sales as consumers continued to tighten spending, shunning computers and electronic goods. Revenues from outlets open at least for a year fell 3.4% in the quarter ended Jun 30, the Sydney-based company said in a statement today.

Wesfarmers outperformed its larger rival Woolworths in the fourth quarter, reporting solid sales growth in food and liquor and positive sales growth at Kmart as the turnaround continues.

Resources News

China’s Minerals and Metals Group reported a jump in quarterly zinc and lead production and says it is on track to meet its annual production target, attributing the improved performance to solid output at its Century mine in Queensland and a planned zinc campaign at its Golden Grove mine in Western Australia.

MMG said it produced 178,979 tons of zinc metal in concentrate in the quarter to June 30, up 28% from the previous quarter. Lead production in the quarter was 12,851 tons in concentrate form, up 50% from the previous quarter, the company said in a statement today.

Shares in Minemakers Ltd jumped after the company said it would offer 50% of the assets in exchange for debt financing for its Wonarah phosphate project in the Northern Territory.

The company said it has signed an agreement with financial advisory firm Verte Group to attract Asian parties to finance the potential development of the project.

Gainers and Losers

Lynas Corporation Ltd led the gainers in the ASX 200 with a gain of 9.09% to A$0.78 followed by Carnarvon Petroleum Ltd 7.25% to A$0.37 and Kagara Ltd 6.78% to A$0.63.

QBE Insurance led the decliners with a fall of 5.56% to A$16.97 followed by Energy World Corp 3.26% to A$0.445 and Harvey Norman Holdings 3.01% to A$3.54.