Australian Stocks Flat; Wespac May Not Pass on Future Rate Cut

Marcus Jacob
14 Dec, 2011
New York City

Australian benchmark indexes closed nearly flat and the dollar briefly traded below parity. Mining and energy stocks generally closed higher. Rio Tinto said it has no immediate plans to increase its stake in Canada based Ivanhoe Mines. Westpac chief indicated future rate cuts may not be passed on.

[R]8:00 PM Sydney – Australian benchmark indexes closed nearly flat and the dollar briefly traded below parity. Mining and energy stocks generally closed higher. Rio Tinto said it has no immediate plans to increase its stake in Canada based Ivanhoe Mines. Westpac chief indicated future rate cuts may not be passed on to customers.[/R]

Australian stocks were flat and the latest read on consumer sentiment by a private survey showed a decline.

The two latest rate cuts have failed to lift the sentiment as Australian two-speed economy creates a few high paying jobs in the mining regions and high dollar and high consumer price inflation has left many struggling.

The ASX 200 index fell 2.9 to 4,190.5 and All Ordinaries index fell 1.9 to 4,249.80. The Australian dollar edged lower to US$1.007 after falling below 99.9 U.S. cents in intraday trading.

In trading, stock turnover increased to 1.9 billion shares worth $3.87 billion.

Stock Movers

BHP Billiton Ltd fell $0.12 to $35.70 and Rio Tinto Ltd added $0.40 to $63.16. Newcrest Mining declined $0.37 to $31.81.

Rio Tinto confirmed that it has no immediate plans to increase its stake in Canada based Ivanhoe Mines after it won an arbitration ruling that will allow the company to raise its stake after January 19.

Fortescue Metals Group increased 4 cents to $4.69, Lynas Corporation Limited closed down 1 cent to $1.27 and Iluka Resources gained $0.17 to $16.54.

Oil Search Limited traded up 3 cents to $6.40, Santos Limited fell 11 cents to $12.90 and Woodside Petroleum increased $0.10 cents to $31.63.

Commonwealth Bank of Australia increased $0.03 to $49.38 and National Australia Bank added 11 cents to $23.86. ANZ edged up 23 cents to $20.97. Westpac fell 3 cents to $20.80.

Westpac Chief Executive Gail Kelly said in a statement ahead of annual general meeting that higher funding costs will put pressure on margins and also hinted that future rate cuts may not be passed to customers.

Four largest banks in Australia have passed on two successive interest rate cuts to consumers but banks are resisting lowering future rate cuts despite record profitability and extravagant salaries for executives.

The four largest banks reported annual profit of $25 billion and relied on funding of $100 billion from Europe and U.S. to bridge the gap between loans and deposits. The banks rely for 20% of funding from the Reserve Bank of Australia and not all rate cuts in the past have been passed on to consumers.

David Jones Limited added 3 cents to $2.69 and Wesfarmers Limited added 7 cents to $30.80 Harvey Norman Holdings closed unchanged at $2.08.

Woolworths Limited closed down 22 cents to $25.95.

Qantas Airways Ltd closed unchanged at $1.53, Virgin Australia closed unchanged at 35.5 cents and Flight Centre gained 58 cents to $19.85.

QBE Insurance Group Limited decreased 24 cents to $13.71.