Australian Stocks Fall After Hawkish Comments from RBA Governor

Marcus Jacob
15 Jun, 2011
New York City

Australian stocks sold off after hawkish comments from the RBA governor Glenn Stevens. Two-speed economic developments in Australia are expected to widen more as mining investment increase and inflation accelerates in the future. Qantas plans to cut $700 million of spending.

[R]4:30 PM Sydney – Australian stocks sold off after hawkish comments from the RBA governor Glenn Stevens. Two-speed economic developments in Australia are expected to widen more as mining investment increase and inflation accelerates in the future. Qantas plans to cut $700 million of spending.[/R]

The Australian stocks closed lower after Reserve Bank Governor Glenn Stevens made hawkish comments.

The ASX 200 index decreased 18.2 to 4,566.8 and All Ordinaries index added 0.4% or 15.70 to 4,635.40.

Stock trading eased to 2.5 billion shares worth $5.5 billion. Of the shares traded, 465 increased, 620 declined and 408 were unchanged.

The Australian dollar increased a fraction to US$1.064 and crude oil price edged 65 cents lower to US$98.72 a barrel.

The overnight jump in the U.S. indexes helped to improve the sentiment in trading but investors turned cautious after hawkish comments from the RBA governor Stevens.

He stressed that Australia is in the middle of the once in a generation mining boom and the strongest business investment cycle.

He also noticed that stronger Australian dollar and low unemployment are benefiting all Australians even though the benefits from the mining boom were not obvious to all consumers.

He also commented, “Looking ahead, our most recent analysis concluded that the underlying rate of inflation is more likely to rise than fall over the next couple of years.”

Stevens also noted that the divergences in “two-speed economy” of Australia are likely to widen more as mining investment accelerates in the next few months.

Stock Movers

BHP Billiton declined 16 cents to $42.89 and Rio Tinto fell 13 cents to $80.08. Newcrest Mining decreased 49 cents to $37.

Banks closed higher.

National Australian Bank increased 17 cents to $24.65, Commonwealth Bank declined 13 cents to $50.32 and Westpac fell 30 cents to $21.74. ANZ fell 1 cent to $21.82.

Downer EDI increased 5 cents to $3.83 after the company said RailCorp completed the inspection for the first run of the Warath train.

Qantas Airways decreased 3 cents to $1.85 after the company outlined $700 million of spending cuts over the next two years. The company also cut the delivery of aircrafts in the current in the fiscal year to 34 from 43.

The airline revised its domestic capacity growth in the current year to 5.5% from the previous estimate of 8%.

Qantas also plans to cut its capital expenditure by $100 million this financial year and trim $300 million in the next year and lower leasing fees by $300 million.