Australia's Current Account Deficit Widens; Metcash Profit Warning

Chandrasekhar Atreya
30 Nov, 2010
New York City

Australian stocks closed lower tracking losses in resource stocks as the U.S. dollar advanced against all major currencies. Current account deficit widened in the third quarter to A$7.83 billion. Retailers closed lower after Metcash issued profit warning and net in the first half edged up 0.9%.

[R]6:00 PM Sydney – Australian stocks closed lower tracking losses in resource stocks as the U.S. dollar advanced against all major currencies. Current account deficit widened in the third quarter to A$7.83 billion. Retailers closed lower after Metcash issued profit warning and net in the first half edged up 0.9%.[/R]

Australian dollar and stocks declined tracking the weakness in Europe and Chinese markets. On-going euro-zone debt worries and talks of additional tightening in China kept commodities lower.

The ASX 200 Index dropped 0.74% or 34.10 points to close at 4,584.40 and the index declined 1.66% in the month. The Australia dollar declined to 95.90 U.S. cents.

The current account deficit widened due to deterioration in the country’s trading conditions, according to a report from The Australian Bureau of Statistics.

The current account deficit widened to $7.8 billion in the quarter ended September, compared with a revised $5.4 billion deficit in the June quarter, since export volumes failed to keep pace with the previous three months, the statistics agency said in the report.

The Chinese government banned imports of lobsters from Australia on Monday but continued to take in rock lobsters from New Zealand and South Africa.

The $70 million rock lobster Tasmanian industry relies heavily on the demand from China.

Woodside Petroleum increased the estimate for the first stage of its Pluto LNG project by $1.3 billion and has also delayed the first shipment from the project site.

Woodside said it expects the project to be completed in August 2011, instead of March 2011, and hopes to ship its first load a month later. It said it was forced to review the cost after discovering that its flare towers were not cyclone proof.

The insurance arm of Aon said in its monthly update that the engine failure damage on the Qantas A380 aircraft has been valued at just under $70 million as a result of significant damage to the engine and aircraft wings.

The valuation is only for equipment damage and not business loss from the grounding of the A380 fleet. The carrier may seek compensation from Rolls-Royce Group, maker of the faulty A380 engine.

Stock Movers

Resource stocks declined on the fall in commodities after the U.S. dollar gained against the euro and major currencies.

BHP Billiton declined 1.6% or 49 cents to A$42.75 and Rio Tinto fell 1.9% or A$1.62 to A$82.22.

Metcash, grocery wholesaler issued earnings warnings and said falling prices and rising costs can jeopardize its second half earnings estimate. Metcash dropped 2.6% to A$4.11.

The grocery and hardware wholesaler said net income in the first ending in October increased 0.9% to A$110 million on the revenues increase of 5.8% to 5.98 billion.

Retailers declined on the worries that sales growth may be affected in the rest of the year.

Wesfarmers dropped 1.5% to A$31.46 and Myer Holdings fell 1% to A$3.65. Woolworths declined 0.8% or 17 cents to close at A$26.81.

Bank of Queensland and QBE Insurance gained around 1%, bucking the trend of a decline in banking stocks.