Inflation in Australian Jumps, Australian Dollar Record

Marcus Jacob
27 Jul, 2011
New York City

Australian stocks declined after inflation accelerated in the second quarter. Food and household services prices increase lifted inflation in the second quarter to 0.9% from the first quarter and rose 3.6% on an annual basis. Banks, steelmakers declined after the Australian dollar rose to a record.

[R]4:30 PM Sydney – Australian stocks declined after inflation accelerated in the second quarter. Food and household services prices increase lifted inflation in the second quarter to 0.9% from the first quarter and rose 3.6% on an annual basis. Banks and steelmakers declined after the Australian dollar rose to a record high of $1.10.[/R]

Stocks in Sydney dropped after inflation in the second quarter was ahead of expectations. The faster than expected increase in food, clothing and household services prices raised the prospect of a rate hike at the next meeting.

The Australian Bureau of Statistics said inflation in the second quarter to June increased 0.9% from the previous quarter and rose 3.6% on an annual basis.

Australia has been buffeted by the worldwide increase in commodities prices as the dollar gained 32% against the U.S. dollar in the last two years. However, food prices have been on the rise after the natural disasters in the year.

The sharp increase in inflation was ahead of expectations that many economists had set of 0.8% rise in the quarter and 3.5% on an annual basis.

The ASX 200 index decreased 35.90 or 0.8% to 4,537.40 and All Ordinaries index fell 0.7% or 33.70 to 4,612.60.

In trading, turnover increased to 2.08 billion shares worth $4.84 billion and 649 shares increased, 425 decreased and 357 were unchanged.

The Australian dollar increased to US$1.106. The Australian dollar traded at a new three-decade high against the British pound and American dollar.

Stock Movers

Steelmakers declined after the Australian dollar gained. BlueScope decreased 7% and OneSteel declined 3.4%

Energy related stocks closed higher after crude oil flirted near $100 a barrel.

Woodside Petroleum added 7 cents to $39.55 and Origin Energy decreased 13 cents to $15.09. Santos Limited decreased 15 cents to $13.09.

Retailers closed lower. Wesfarmers decreased 13 cents to $30.09 and Woolworths closed unchanged at $27.40.

BHP Billiton Ltd fell 52 cents to $43 and Rio Tinto decreased 40 cents to $82.59. Newcrest Mining Ltd increased 32 cents to $40.50.

Banks fell on the worries that a sudden rise in inflation may prompt a rate hike at the next central bank meeting.

Commonwealth Bank of Australia decreased 0.8% or 40 cents to $49.82 and National Australian Bank decreased 37 cents to $24.45. Westpac Banking Corp fell 34 cents to $21.02. ANZ declined 27 cents to $21.28.