Australian Rates on Hold; Cyclone Forces Queensland Mine Closures

Bikram Pandey
01 Feb, 2011
New York City

Australian stocks closed mixed and the Reserve Bank of Australia left its rate on hold at 4.75%. RBA also noted that underlying inflation is expected to remain within its target range of 2% to 3% in the year. Cyclone Yasi is forcing another round of mine closure and coal shipment suspension.

[R]7:00 PM Sydney – Australian stocks closed mixed and the Reserve Bank of Australia left its rate on hold at 4.75%. RBA also noted that underlying inflation is expected to remain within its target range of 2% to 3% in the year. Cyclone Yasi is forcing another round of mine closure and coal shipment suspension.[/R]

Australian stocks in a weak trading edged lower as the dollar hovered above the parity. Resource stocks closed mixed but and the prices of crude oil, copper and zinc rose to a 2-year high.

The benchmark ASX 200 index declined 1.8 to 4,752.10 and All Ordinaries index gained 2 to 4,852. The Australian dollar closed at 1.0060 and gold edged up $3.70 to $1,338.20.

Queensland is bracing for another period of closure as cyclone Yasi force businesses to shut down. Banana, pineapple and sugar crop are expected to face widespread damage and coal mining and shipping are closed.

Reserve Bank of Australia left its key lending rate unchanged after one-day meeting today and Governor Glenn Stevens noted underlying inflation at 2.25%.

The central bank left the rate at 4.75% and noted that the underlying inflation in 2010 at 2.25% was at its lowest in ten years.

In an accompanying statement the bank noted that the inflation is expected to stay within its target range between 2% and 3% and noted that flooding in Queensland is having “temporary adverse effect on economic activities and prices.”

The central bank also noted that the demand for rebuilding after flood damages is unlikely to have a major impact on the inflation outlook in the medium term.

Stock Movers

Resource stocks closed higher despite the impending closure of mines in Queensland ahead of cyclone. The 2-day rally in commodities prices lifted Brent Crude oil in London trading above $100 a barrel and copper to a high last seen in March 2008.

Cougar Energy gained 50% on the first day of trading after a trading halt and the company said it will appeal Queensland government proposal to ban activities at its underground coal gasification project at Kingaroy.

BHP Billiton gained 37 cents to A$44.62 and Rio Tinto increased 6 cents to A$84.11.

Gold traded higher but Newcrest Mining declined 29 cents to A$36.69.

Banks closed mixed after the RBA left its rate on hold. National Australia Bank declined 7 cents to A$24.59, Commonwealth Bank declined 1 cent to A$52.41, Macquarie Group gained 15 cents to $40.77 and Westpac gained 5 cents to A$23.04.