Australian Markets Fall 2%; Telstra Shareholders Approve Handover

Marcus Jacob
18 Oct, 2011
New York City

Australian stocks were caught in cross currents weak Chinese economic growth data and ongoing worries in the euro zone. The benchmark indexes declined more than 2% and Qantas cancelled 80 additional flights. Telstra shareholders approve handover of fixed line monopoly to NBN.

[R]6:00 PM Sydney – Australian stocks were caught in cross currents weak Chinese economic growth data and ongoing worries in the euro zone. The benchmark indexes declined more than 2% and Qantas cancelled 80 additional flights. Telstra shareholders approve handover of fixed line monopoly to NBN.[/R]

Australian and Asian markets dropped after the euro zone worries resurfaced ahead of the weekend summit.

German officials downplayed the bank recapitalization plan and noted that financial markets are optimistic. The cautious statements from German finance minister and the spokesperson for Chancellor Angela Merkel surprised the markets and indexes dropped more than 2%.

In addition, resource prices were lower after China reported third quarterly economic growth that showed a slowing growth. The third quarter growth fell to annual growth rate of 9.1% after the economy expanded at 9.5% in the second quarter and 9.7% in the first.

The slowing growth in China added more volatility to commodities prices and crude oil, copper and gold declined in Asian trading.

Industrial production increased 13.8% in September after rising at 13.5% in August and retail sales increased 17.7% compared to 17% in August.

The ASX 200 index decreased 88.5 or 2.07% to 4,186.9 and All Ordinaries index fell 88.4 or 2.04% to 4,249.50.

The Australian dollar fell 0.3% to US$1.0126.

Trading volume increased to 1.69 billion shares worth $4.17 billion with 264 stocks trading higher, 765 declined and 295 closed unchanged.

Stock Movers

Telstra Corporation Limited increased 2 cents to $3.13 after shareholders approved the handover of fixed line monopoly to NBN for $11 billion. The company also said it will hold its dividend at 28 cents a share in the current and the next fiscal year.

BHP Billiton Ltd decreased $1.25 to $36.40 and Rio Tinto Ltd declined $3.70 to $66.25. Aquarius Platinum fell 18 cents $2.91. Iluka Resources fell $1.37 to $15.58.

Fortescue Metals decreased 47 cents to $4.67 and iron production in the fiscal quarter ending in September increased 5.4% to 12.2 million tons. Production cost declined 6.4% to US$49.78 a ton and selling priced increased to US$160 a ton.

Spot price of iron ore this month declined to US$154 a ton from US$161 a ton and the latest slowdown from China highlighted another round of price softness.

Linc Energy fell 9 cents to $2.04 and Leighton Holdings decreased 32 cents to $20.55.

Oil Search Limited decreased 5 cents to $5.97, Santos Limited fell 32 cents to $12.22 and Woodside Petroleum declined 39 cents to $34.98.

Cochlear Limited dropped 96 cents to $53.54 after the maker of bionic ears said losses linked to its recall of Nucleus 5 are expected to be between $130 million and $150 million and earnings after tax are estimated to fall between $20 million and $30 million.

The company increased its dividend to $1.20 a share for the year from $1.05 a share.

Commonwealth Bank of Australia closed down $0.86 to $47.45 and National Australia Bank decreased 52 cents to $24.23. ANZ edged down $0.29 to $21.07. Westpac decreased $0.41 to $21.58.

David Jones Limited closed unchanged at $2.97 and Wesfarmers Limited increased $0.06 to $32.

Super Retail Group was halted at $6.50 after the company said it will acquire sports goods retailer Rebel Group for $610 million.

Woolworths Limited decreased 24 cents to $24.45 and James Hardie Industries SE decreased 12 cents to $5.58. Treasury Wine Estate rose 7 cent to $3.77.

Qantas decreased 8 cents to $1.46 after the company canceled 80 domestic flights and ground two more planes. The flight cancelations are not extending into Novembers as engineers lead strike and other workers threaten to join.