Sixth Day of Losses in Australia; 10-year Bond at 3.8%

Marcus Jacob
25 Nov, 2011
New York City

Australian stocks eased on the growing euro zone worries and weak commodities. Australian completed the sale of $700 million of 5-year bonds that yielded 3.25%. The yield on 10-year bond declined to the low last seen in March 2009. Woodside Petroleum fell after new natural gas wells were abandoned.

[R]6:00 PM Sydney – Australian stocks declined on the growing euro zone worries and weak commodities prices. Australian completed the sale of $700 million of 5-year bonds that yielded 3.25%. The yield on 10-year bond declined to the low last seen in March 2009. Woodside Petroleum declined after new natural gas wells failed to deliver.[/R]

Australian stocks edged lower and commodities were generally weak in Asian trading.

Market tone was determined by the events in Europe and investors feared that the political impasse in the region may drag euro zone into a recession sooner than expected.

The Australian Office of Financial Management said that its latest auction of $700 million 5-year bond had bid-to-cover ratio of 3-to-1 and average yield declined to 3.25%.

The AOFM is planning to sell $53 billion of bonds in 2012 to global investors, including $2 billion of bonds linked to inflation.

At least for now Australia seems to a beneficiary of the growing euro zone debt contagion. Australian bond auction was heavily subscribed and bond yields dropped to a near the low last seen in March 2009 when the world was gripped in short term lending squeeze.

The 10-year government bond traded at 3.806% yield lower than the 3.87% in the beginning of the month and less than 5.4% n May.

The ASX 200 index fell 59.9 or 1.5% to 3,984.30 and All Ordinaries index decreased 1.4% or 57.7 to 4,057.60. For the week, the ASX 200 index declined 4.6%.

The Australian dollar fell 0.3% to US$0.969.

Stock Movers

BHP Billiton Ltd closed down 48 cents to $34.05 and Rio Tinto Ltd fell $0.46 to $61.95. Newcrest Mining decreased 97 cents to $33.42.

Fortescue Metals Group decreased 3 cents to $4.51, Lynas Corporation Limited decreased 2 cents to $1.10 and Iluka Resources fell $0.29 to $14.53.

Uranium miner Paladin Energy fell 2 cents to $1.41 and Peninsula Energy Ltd closed down 0.2 cent to 3.8 cents. Extract Resources increased 3 cents to $7.65.

Flinders Mines soared 10.5 cents to 27 cents after it agreed to a takeover that valued the iron ore miner at 30 cents or $554 million from Russia based Magnitogorsk Iron & Steel. Last week the iron ore mining company had indicated at its annual general meeting that the stock could be worth as much as $1.73 if the Pilbara project faced no hurdle and market conditions were buoyant.

Oil Search Limited traded down 13 cents to $5.90, Santos Limited gained 5 cents to $12.33 and Woodside Petroleum closed down $2.06 cents to $33.36.

Earlier today, Woodside said its efforts to find more gas at other drilling wells at its high profile Pluto project were not successful. The deepwater well drilled in the Exmouth plateau off the coast of Western Australia showed less than commercially viable quantities of hydrocarbons.

Commonwealth Bank of Australia closed down $1.21 to $45.39 and National Australia Bank decreased 42 cents to $21.82. ANZ edged down 24 cents to $18.077. Westpac fell 25 cents to $19.50.

David Jones Limited closed down 13 cents to $2.68 and Wesfarmers Limited fell 70 cents to $30.66. Harvey Norman closed down 3 cents at $1.99.

Woolworths Limited closed down 33 cents to $24.23 and James Hardie Industries SE decreased 4 cents to $6.26.

Qantas Airways Ltd closed down 4 cents to $1.46, Virgin Australia fell 0.5 cent 34 cents but Flight Centre added 10 cents to $18.28.

QBE Insurance Group Limited dropped 5.5% or 76 cents to $13.09 on the worries that the European business may suffer if the debt contagion continues in the region.

Foster’s Group increased 3 cents to $5.37 after the brewer won a regulatory approval under foreign acquisition laws for the takeover by SABMiller for $11.5 billion.