Australian Stocks Drop 3%; Dollar 4-month Low

Marcus Jacob
08 Aug, 2011
New York City

Australian stocks extended losses by 3% and the benchmark index fell for the fifth day in a row to drop below 4,000 for the first time in two years. The benchmark index is down more than 20% from its peak and in bear territory as resources linked companies and banks declined.

[R]4:30 PM Sydney – Australian stocks extended losses by 3% and the benchmark index fell for the fifth day in a row to drop below 4,000 for the first time in two years. The benchmark index is down more than 20% from its peak and in bear territory as resources linked companies and banks declined.[/R]

Australian stocks extended losses for the fifth day in a row and the benchmark index declined below 4,000 for the first time in the last two years.

Indexes in Australia and Asia declined after late Friday Standard & Poor’s cut rating on the U.S. debt from its highest AAA rating to AA+. The other two agencies left the rating unchanged on August 2 after the U.S. lawmakers struck a debt and spending agreement.

S&P left its view on the short term debt unchanged and lowered only the long term debt rating and cited that the U.S. needs at least $4 trillion in spending cuts or revenue increase to meet lower its $14 trillion in debt.

The Australian index extended its losses by 3% after losing 4% on Friday and the benchmark index is down 21% from the peak and entered in the bear market correction phase.

The ASX 200 index decreased 119.30 or 2.9% to 3,986.10 and All Ordinaries index fell 4.2% or 113.20 or 2.7% to 4,056.70. The benchmark ASX 200 index is now down 22% from its peak in April and the index is now trading at a 2-year low.

The Australian dollar decreased 1.1% to US$1.034 after global economic worries dragged the currency lower.

In, trading, 3.15 billion shares changed hands worth $7.8 billion and 196 shares gained, 1,039 declined and 313 closed unchanged.

Stock Movers

Energy and miners traded lower after oil declined to $86 a barrel in New York trading and gold added $8.10 to $1,658.20 an ounce in New York trading.

BHP Billiton Ltd fell $1.52 to $36.60 and Rio Tinto decreased $3.37 to $68.63. Newcrest Mining Ltd decreased 38 cents to $38.82 and AngloGold Ashanti added 27 cents to $8.21.

Coal & Allied soared 28% to $116.20 after its largest investors Rio Tinto and Mitsubishi Development to acquire the shares of the company they do not own.

Voyager Resources added 0.5 cent to 5.4 cents after it discovered a new copper field in South Gobi region in Mongolia.

Woodside Petroleum Limited declined $0.74 to $33.81 and Santos Limited fell 22 cents to $11.30. Origin Energy fell 3% or 43 cents to $13.66.

Banks closed lower for the third day in a row on the worries that the European rescue fund may not be large enough to supports the Italian and Spanish bond markets and the latest downgrade of the U.S. debt may increase the cost of wholesale funding.

Commonwealth Bank of Australia decreased $0.64 to $45.62 and National Australian Bank decreased 87 cents to $20.90. ANZ declined 60 cents to $18.50.

Leighton declined $1.05 to $18.22.

JB Hi-Fi declined 35 cents to $14 after it reported 8% decline in profit to $109.7 million. The earnings were up 13.3% to $134 million when one-time restructuring charges were not counted.

Sales in the year increased 8.3% to $2.96 billion and the company guided 8% increase in sales in the current financial year on the 16 new stores opening.

David Jones Limited dropped 12 cents or 4.3% to $2.67 and Wesfarmers Limited declined 25 cents to $27.75. Myer Holdings declined 7 cents to $2.14.