Australian Index Drops 0.7%; Caltex Lowers Outlook

Marcus Jacob
20 Jun, 2011
New York City

Australian stocks dropped as markets in Asia declined after the euro-zone finance ministers failed to agree on Greek bailout terms and delayed the decision to early July. The uncertainty and rising prospect of Greek defaults unnerved the Asian markets. Caltex lowered its profit estimate.

[R]4:30 PM Sydney – Australian stocks dropped as markets in Asia declined after the euro-zone finance ministers failed to agree on Greek bailout terms and delayed the decision to early July. The uncertainty and rising prospect of Greek defaults unnerved the Asian markets. Caltex lowered its profit estimate by as much as 40%.[/R]

World markets edged lower after the euro-zone finance ministers delayed the decision on bailout conditions till early July. The uncertainty hobbled world markets and the euro. In addition G-7 finance ministers also conducted emergency conference call before the Asian markets opened.

The ongoing Greek troubles have been at the centre stage of world investors for the third week in a row as Greece struggles with the implementation of new austerity measures and ramp up asset sale to meet the demands of the European regulators.

The finance ministers rejected a proposal to approve a further €12 billion to Greece on the grounds that the country needs to implement the planned €28 billion spending cuts and rapid privatization.

The deeply unpopular austerity measures have divided the Greek government and people have rioted on the streets for more than one week. Greek Prime Minister George Papandreou will seek a vote of confidence in the Parliament on Tuesday.

Asian markets dropped sharply on the Greek worries and weak regional economic data. The benchmark index in Hong Kong dropped 2.9% and in Japan declined 0.6%.

The ASX 200 index declined 33.20 or 0.7% to 4,451.7 and All Ordinaries index fell 0.9% 38.6 to 4,512.5.

The Australian dollar decreased to US$1.053 and Russia plans to increase its holdings of Australian dollar in its international reserves. The first deputy chairman of the Russian central bank, Alexei Ulyukayev said that the bank will increase its holdings of the dollar to 1% of U$528 billion from September.

In trading, turnover decreased to 2.4 billion shares worth $5.1 billion. Of the stocks traded, 331 stocks increased, 875 decreased and 376 closed unchanged.

Stock Movers

Caltex declined 78 cents or 6.8% to $10.60 after it lowered its profit outlook for the first half to between $100 million and $115 million from $163 million a year ago.

Resources and energy linked stocks closed lower.

BHP Billiton declined 59 cents or 1.4% to $41.36 and Rio Tinto fell 52 cents or 0.7% to $77.30.

Banks led the decliners in trading today on the worries that if Greece defaults than the prospect of wholesale funding market may be affected as at the time of Lehman collapse in late 2008.

Commonwealth Bank declined 2 cents to $49.50, ANZ lost 10 cents to $21.24 but NAB added 8 cents to $24.44.