Australia Cuts Rate to 4.5% and Home Prices Fall 1.2%

Marcus Jacob
01 Nov, 2011
New York City

Australian indexes declined tracking weak markets in Asia and Reserve Bank of Australia lowered rate by 25 basis points to 4.5%. Home prices declined for the third quarter in a row with Brisbane leading the fall.

[R]6:00 PM Sydney – Australian indexes declined tracking weak markets in Asia and Reserve Bank of Australia lowered rate by 25 basis points to 4.5%. Home prices declined for the third quarter in a row with Brisbane leading the fall.[/R]

Stocks in Australia declined tracking lower international markets, weak manufacturing reading in China and a rate cut by the central bank.

Reserve Bank of Australia lowered its cash rate by 25 basis points to 4.5% from 4.75%. Commonwealth Bank and Westpac followed the suit and trimmed its lending rates by 25 basis points.

The RBA cut rates for the first time since April 2009.

Market sentiments was dented after China reported weak manufacturing reading and the U.S. based futures brokerage firm MF Global filed bankruptcy protection in New York.

The firm is the first casualty from the stress in the European sovereign bonds market after broker could meet margin call. The company had confirmed that it had holdings of $6.3 billion in sovereign bonds of Italy and Spain and faced margin calls after rating agencies lowered their views on these bonds.

The ASX 200 index decreased 1.5% or 65.2 to 4,232.9 and All Ordinaries index declined 1.5% or 63.30 to 4,296.2. For the October month, the ASX 200 index gained 7.1%, its best monthly performance since July 2009 when the index soared 7.6%.

The Australian dollar fell 2.1% to US$1.031.

Australian Home Prices Fall

Australian home prices declined 1.2% in the third quarter to September from the previous when prices dropped 0.5% after the latest revision.

The home prices declined for the third quarter in a row and fell 2.2% from a year ago, according to the ABS.

Weighted average of the existing homes, as measured by the Australian Bureau of Statistics, declined in eight large cities and the largest declines were in Brisbane of 2.5%, in Canberra and Melbourne.

Separately, Housing Industry Association said new home sales in Western Australia declined 3.5% in September and declined 3.5% across Australia. New home sales in the quarter to September declined 4%.

Stock Movers

BHP Billiton Ltd closed down $1.03 to $36.77 and Rio Tinto Ltd declined $2.06 to $67.15.

Fortescue Metals Group decreased 8 cents to $4.77, Lynas Corporation Limited closed unchanged at $1.205 and Iluka Resources fell 84 cents to $15.36.

Oil Search Limited decreased 6 cents to $6.50, Santos Limited fell 15 cents to $12.81 and Woodside Petroleum fell 39 cents to $36.17.

Cochlear Limited fell $1.36 to $57.21.

Commonwealth Bank of Australia closed down 57 cents to $48.70 and National Australia Bank decreased 60 cents to $25.10. ANZ edged down 32 to $21.36. Westpac fell 38 cents to $21.94.

David Jones Limited closed down 10 cent to $3.29 and Wesfarmers Limited decreased 14 cent to $32.46.

Wesfarmers plans to issue $300 million local corporate bond issue with a five year maturity that will yield 150 basis points above the bank bill swap rate, according to two banking sources in Sydney.

Woolworths Limited decreased 14 cent to $23.67 and James Hardie Industries SE decreased 20 cents to $6.03. Treasury Wine Estate closed down 5 cents at $3.72.

Qantas Airways Ltd closed up 2 cents to $1.63 and the company is close to flying its normal schedule from tomorrow.

Singapore Airlines Ltd said it plan to launch a new long haul budget airline that in the next nine months. Scoot will fly to Australia and China and will expand later to Europe, India and Middle East.

Virgin Blue fell 0.05 cents to 37 cents but Flight Centre declined 5 cents to $19.83.