Australian Index Drops 1.6%; Core inflation Lowered

Marcus Jacob
14 Sep, 2011
New York City

The benchmark index in Australia declined 1.6% following the indexes in Asia lower. Australian banks declined as French banks faced trimmed access to short term funding in the U.S. money markets. Cochlear dropped 14% as the competitor won the U.S. regulatory approval.

[R]4:30 PM Sydney – The benchmark index in Australia declined 1.6% following the indexes in Asia lower. Australian banks declined as French banks faced trimmed access to short term funding in the U.S. money markets. Cochlear dropped 14% as the competitor won the U.S. regulatory approval.[/R]

The Australian stock benchmark index declined on the euro zone bank debt worries and the dollar fell after the release of the inflation data.

Market indexes in Asia and in Australia were on the decline after Moody’s Investors Service lowered its views on second and third largest French banks, Credit Agricole and Societe Generale and placed the largest bank BNP Paribas on a watch.

The news was widely anticipated and the rating agency has been lagging the market perception as usual. Moody’s lowered the rating by one notch to Aa3 for Soc Gen and Aa1 for Credit Agricole and said that the debt of Greek debt exposure is manageable but the size of the debt is not consistent with the rating.

France’s largest bank BNP Paribas rating was left at Aa2 and the rating agency said that the bank debt will be under review with a possible downgrade.

BNP Paribas also said on its web site that it will cut its risk weighted capital by 70 billion euros and increase its Tier 1 capital ratio to 9% by the start of 2013.

The ASX 200 index declined 66.90 or 1.6% to 4,005.8 and All Ordinaries index fell 68 or 1.6% to 4,090.4.

The Australian dollar closed down 0.7% to US$1.0241 and gold price increased $2.29 to US$1,828.91.

In trading, stock volume was near the weekly average at 2.21 billion shares worth $5.71 billion.

Australian dollar fell after the latest data indicated weaker than earlier estimated inflation. The core inflation in the second quarter was lowered to 0.5% from the previous estimate of 0.9%.

The mean measure of core inflation, another measure to gauge inflation was also lowered to 0.7% increase from 0.9% previous estimate.

Australia inflation is measured as an average of the two data and core inflation was averaged to 0.6%.

Annual core inflation was revised to 2.6% increase in the second quarter from 2.7% in the prior estimate.

Stock Movers

Cochlear, the maker of hearing implants rebounded dropped 14.6% to $51.30 as the competitor Sonova won the U.S. regulatory approval.

BHP Billiton Ltd decreased $0.39 to $36.90 and Rio Tinto fell $0.55 to $68.35. Newcrest Mining Limited declined 65 cents to $38.75 and Atlas Iron increased 5 cents to $3.46.

Iluka Resources decreased 65 cents to $14.61.

Oil Search Limited decreased 22 cents to $5.83, Santos 27 cents to $10.94 and Woodside Petroleum dropped 89 cents to $32.25.

Origin Energy declined 17 cents to $12.83.

Commonwealth Bank of Australia decreased $1.11 to $44 and National Australia Bank fell 67 cents to $21.81. ANZ declined 30 cents to $19.02. Westpac dropped 39 cents to $18.92.

Macquarie Group increased 82 cents to $21.24. Wesfarmers declined 39 cents to $30.11.

Qantas Airways Limited fell 1 cent to $1.49.

Telstra increased 2 cents to $3.02.