Australian Index Dives 1%; Metcash Won Interim Court Ruling

Marcus Jacob
20 Sep, 2011
New York City

The Australian stocks declined on the persistent worries related to the euro zone and growing pessimism about the prospect of Greek default. Italy rejected a debt downgrade by S&P. Resource stocks and banks declined in Sydney trading. Metcash won an interim court ruling to acquire Franklins.

[R]6:30 PM Sydney – The Australian stocks declined on the persistent worries related to the euro zone and growing pessimism about the prospect of Greek default. Italy rejected a debt downgrade by S&P. Resource stocks and banks declined in Sydney trading. Metcash won an interim court ruling to acquire supermarket chain Franklins.[/R]

Australian stocks gyrated with the news flow from the euro zone and the United States. The market indexes opened higher but quickly turned lower on the Italian debt downgrade.

Market indexes in Hong Kong and India edged higher but in Japan closed lower after a 3-day weekend.

The ASX 200 index fell 41.30 or 1% to 4,040.2 and All Ordinaries index fell 39.3 or 0.9% to 4,124.8.

The Australian dollar rose 0.6% to US$1.028 and fetched 79.09 yen compared to 78.49 yen yesterday. The spot price of gold fell $49.60 to US$1,774.10 per ounce.

In trading, stock volume decreased to 1.58 billion and shares worth $4.22 billion changed hands.

Metcash and Franklins Merger to Proceed

In a blow to the Australian Competition and Consumer Commission, Justice Peter Jacobson rejected its interim demand to block the purchase of Franklins by Metcash.

The ruling by the judge rejected the government regulator’s appeal to block the purchase and the judge cited that the government has not produced “any glaring error or obvious oversight in the primary judgment.”

South Africa based Pick n Pay agreed to sell Franklins to Metcash for $215 million last July and the competition regulator filed a court case in November against the purchase citing a substantial competition issues in the wholesale grocery business.

The ACCC lost its case in August and appealed in a Federal Court and Franklins filed a motion to reject the appeal to expedite the merger citing business reasons and difficulty in conducting the business while the court decision is pending.

Today’s ruling was a setback to the ACCC but the court allowed the merger to proceed and set an earlier date next month to hear the appeal.

Stock Movers

Metcash increased 4 cents to $41.12 after the company a ruling against the competition regulator to acquire the Franklins supermarket chain.

BHP Billiton Ltd decreased $0.80 to $36.80 and Rio Tinto fell $1.30 to $78.90. Newcrest Mining Limited rose 17 cents to $38.34 and Atlas Iron decreased 2 cents to $3.62.

Iluka Resources closed unchanged at $15.20 and Paladin Energy Ltd decreased 11 cents to $1.47.

Oil Search Limited increased 4 cents to $5.99, Santos Limited fell 2 cents to $11.23 and Woodside Petroleum declined $0.05 to $33.35.

Commonwealth Bank of Australia decreased $0.58 to $44.37 and National Australia Bank fell 44 cents to $22. ANZ declined 9 cents to $19.32. Westpac fell 28 cents to $19.23.

Qantas Airways Limited fell 2.5 cent to $1.52.

David Jones Limited closed unchanged at $2.70 and Wesfarmers increased 16 cents to $30.46.