Weak Miners and Banks in Australia; CBA Net Jumps 3%

Mukesh Buch
17 May, 2012
New York City

Australian stocks made a feeble attempt to rebound as mining and banking stocks traded volatile. BHP walked out of a mining venture in north Queensland and said the project is unviable. Coalworks asked shareholders to reject a takeover bid.

[R]8:00 PM Sydney – Australian stocks made a feeble attempt to rebound as mining and banking stocks traded volatile. BHP walked out of a mining venture in north Queensland and said the project is unviable. Coalworks asked shareholders to reject a takeover bid.[/R]

Australian stocks rebounded in the morning but closed lower after a choppy session that was led by volatility in resource and banking stocks.

ECB President Mario Draghi increased pressured on Greek leaders to stay in the euro zone but also highlighted the limits of the willingness of the central bank. The bank also said it has stopped working with some undercapitalized Greek banks but left open the access to emergency funding window at a higher interest cost.

Most of the Greek banks have been funding their operations with the access to these short term loans as more depositors withdrew money from the banking system.

Yesterday, Greek President cited data from the Greek central bank and said 700 million euros have left banks on Monday alone and additional 100 million euros are likely to leave before the next election.

Greek central bank said approximately $4 billion have left banking system every month in the years 2010 and 2011 and in the first quarter of 2012 and $6.5 billion were withdrawn last month alone.

Greek president worked for the sixth time in a failed bid to form a unity government. Greeks are expected to vote again on June 17.

The ASX 200 index fell 8.10 to 4,157.40 and All Ordinaries index edged down 6.18 to 4,208.50.

In stock trading, turnover decreased to 1.95 billion shares worth $5.14 billion and 460 shares gained, 484 decreased and 398 closed unchanged.

The Australian dollar recovered from the five-month low to 99.45 U.S. cents as nervous investors hedged their bets after the European Central Bank cut off regular funding to some of the undercapitalized Greek banks but continued the access to expensive emergency lending.

Stock Movers

Industrea closed unchanged at $1.24 after General Electric announced a $700 million friendly takeover of the mining equipment maker.

David Jones Limited rose 1 cent to $2.27, Harvey Norman Holdings closed up at 1 cent to $1.98 and Woolworths slipped 6 cents to $26.94.

Myer unchanged to $2.25 and Kathmandu unchanged to $1.25. Billabong International Limited fell 1 cent to $2.15.

Mining and resources linked companies traded volatile as storms gather in the euro zone and Chinese bank lending remained flat.

BHP Billiton increased 28 cents to $32.77 and said it will no longer participate in a joint venture to mine silver, zinc and lead in north Queensland.

Rio Tinto gained 17 cents to $58.16.

Lynas Corporation Limited inched up 5 cents to 92.5 cents and Iluka Resources unchanged to $13.08. Newcrest Mining soared 31 cents to $24.11 and Kingsgate gained 6 cents to $5.13.

Coalworks closed unchanged at $1.02 after it asked shareholders to reject a $142 million takeover offer and a separate move for the resignation of its chairman and chief executive.

Oil Search Limited added 4 cents to $6.75 and Santos Limited advanced 9 cents to $12.37. Orica declined 31 cents to $25.71.

Commonwealth Bank of Australia tumbled 75 cents to $51.02 but earlier dropped as much as 2% after the bank reported third quarter cash profit increased 3% from a year ago to $1.75 billion.

The bank retained its annual earnings outlook of $7 billion but said demand for loans are subdued and competition for deposits is driving the profit margins lower.

Bank of Queensland decreased 8 cents to $6.41. ANZ fell 4 cents to $21.57. National Australia Bank slumped 5 cents at $24.35 and Westpac Banking Corporation plunged 46 cents to $21.22

Insurance Australia Group increased 4 cents to $3.38 after the company said it plans to review its UK business and may pursue a sale of the business.

Stockland edged down 1 cent to $3.22, Leighton advanced 13 cents to $18.05 and Toll Holding declined 32 cents or 6.8% to $4.41.

Qantas added 1 cent to $1.49, Virgin Australia inched down 5 cents to 42 cents and Flight Centre soared 18 cents to $18.69.

QR National added 1 cent to $3.35.