Australian Reported CPI Below Estimates; Seven West Cuts Earnings Outlook

Marcus Jacob
24 Apr, 2012
New York City

Australian consumer price index increased less than expected 0.1% in the quarter to March and rose 1.6% in the year to the month. The weak reported inflation followed the benign wholesale price index data released on Monday. Newcrest Mining lowered its annual production outlook.

[R]8:00 PM Sydney – Australian consumer price index increased less than expected 0.1% in the quarter to March and rose 1.6% in the year to the month. The weak reported inflation followed the benign wholesale price index data released on Monday. Newcrest Mining lowered its annual production outlook and Seven West cut down its operating earnings estimate.[/R]

Australian stocks rose fractionally after the release of inflation data and weak international sentiment on the rising tensions in the euro zone.

Consumer price index increased 0.1% in the quarter to March and jumped 1.6% in the year to the month. Core rate of inflation excluding food and energy prices increased 0.35% in the quarter and rose 2.15% in the year to March.

The price increase tracked by the Australian Bureau of Statistics was less than expected and fueled speculation of another rate cut in the next Reserve Bank of Australia’s meeting on May 1.

However, anecdotal evidence suggests that the government inflation figures understate inflation and most families of four experience at least annual inflation of more than 6%.

At least for now, stock market took the latest read on inflation at its face value and bid up stocks in the expectations that the benign reported inflation will encourage the central bank to lower rates to 4% from the current benchmark rate of 4.25%.

Markets in Asia were on the defensive for the second day of this week after European indexes dropped as much as 2.7% in Monday’s trading. Political uncertainties in France and Holland added to the market jitters ahead of bond offerings from Spain, Italy and The Netherland later in the day.

The ASX 200 index edged up 8.00 to 4,360.40 and All Ordinaries index rose 3.56 to 4,433.86.

The Australian dollar traded lower to $1.026 after the release of consumer price inflation data. Yesterday, wholesale price index declined 0.3% in the quarter to March and fell 1.4% from a year ago in a broad price decline across several industries.

In trading, stock turnover was 1.96 billion shares worth $4.7 billion and 382 stocks increased, 629 decreased and 400 were unchanged.

Stock Movers

Seven West Media lowered its operating earnings outlook to between $460 million and $470 million for the year full year ending on June 25.

BHP Billiton closed down 24 cents to $35.08 and Rio Tinto tumbled $1.05 to $65.60.

Lynas Corporation Limited closed up 3 cents to $1.12 and Iluka Resources dropped 28 cents to $17.04.

Newcrest Mining declined $1 or 3.6% to $26.60 after it reported quarterly production estimates and lowered its full year 2012 estimate to between 2.25 million to 2.35 million ounces from 2.43 million and 2.55 million ounces.

Kingsgate decreased 9 cents to $6.25.

Oil Search Limited increased 8 cents to $7.47. Woodside Petroleum slumped 33 cents to $34.63 and Santos Limited slipped 13 cents to $13.75.

Wesfarmers added 54 cents to $29.88 after the company said sales at its retail unit Coles rose almost 5% in the quarter to March and sales declined 4.4% at Target.

David Jones Limited unchanged to $2.46, Harvey Norman Holdings closed up 3 cents to $2.03 and Woolworths added 1 cent to $25.84. Myer increased 5 cent to $2.37 and Kathmandu unchanged to $1.35.

Billabong International Limited fell 2 cents to $2.76.

Westpac Banking Corporation advanced 33 cents to $22.47 and Commonwealth Bank of Australia increased 20 cents to $51.15. Bank of Queensland gained 12 cents to $7.22. ANZ soared 26 cents to $23.72 and Macquarie Group tumbled 44 cents to $28.40.

Stockland increased 8 cents to $3.12.

Qantas rose 3 cents to $1.64, Virgin Australia edged down 0.015 cents to 39 cents and Flight Centre declined 46 cents to $20.76.

QR National unchanged to $3.63.