Australian Dollar Down 7%, Bond Yields at Record Lows

Marcus Jacob
31 May, 2012
New York City

Australian markets finished the worst month in several years with a loss of 7.3% in the benchmark index on the rising stress in euro zone and lowered growth expectations in China and India. South Australia government debt rating was lowered. Echo Entertainment agreed to a shareholder meeting.

[R]8:00 PM Sydney – Australian markets finished the worst month in several years with a loss of 7.3% in the benchmark index on the rising stress in euro zone and lowered growth expectations in China and India. South Australia government debt rating was lowered. Echo Entertainment agreed to a shareholder meeting.[/R]

The stress in financial markets around the world was visible as global markets completed the worst monthly decline in three years. Euro zone stress is increasingly dragging economies of China and India into a slow growth mode and driving the commodities prices lower.

The stress in bond markets was palpable after Switzerland sold bonds at a negative interest rate of 0.62% on Tuesday and the U.S. Treasury yields dropped near record low on Wednesday. German and Japanese bond yields also declined to near lows as investors sought the safety of principal.

The currency markets are also roiled as the euro falls to a 2-year low against the dollar and the yen and the dollar strengthened after a European Union report painted a weak economic outlook for the region including Germany.

Australian stocks extended losses on the last day of the month and the benchmark ASX 200 index for the month plunged 7.3%.

Australian 10-year bond yield fell to 2.865%, the lowest in the last four decades and rates on 2-year notes fell to a record low to 2.108%.

The ASX 200 index slides 17.90 to 4,076.30 and All Ordinaries index decreased 14.96 to 4,133.73.

In trading, stock turnover increased to 1.9 billion shares worth $5.8 billion and 481 shares closing higher, 499 declining and 394 remained unchanged.

The Australian dollar traded near the low of the year at 97.20 U.S. cents and fell 6.8% in the month and gold declined 6% in the period tracking lower most metals prices.

Stock Movers

Wesfarmers gained 25 cents to $30.40 after the conglomerate said it plans to increase the size of its Coles supermarkets as the rival Woolworths steps up the pressure.

David Jones Limited decreased 4 cents to $2.21 and said three months to April 28 total sales declined 2.9% from a year ago and the retailer is getting ready to launch its annual financial year clearance.

Harvey Norman Holdings closed down 4 cents to $1.97 and Woolworths advanced 25 cents to $26.44.

Kathmandu fell 2 cents to $1.12. Billabong International Limited slides 6 cents to $1.92.

BHP Billiton Ltd slipped 20 cents to $31.97 and Rio Tinto Ltd plummeted 49 cents to $56.86. Fortescue Metals Group slumped 21 cents to $4.62.

Lynas Corporation Limited down 2 cents to $1.03 cents and Iluka Resources closed down 8 cents to $13.40. Newcrest Mining slipped 15 cents to $24.92 and Kingsgate gained 14 cents to $5.24.

Oil Search Limited decreased 8 cents to $6.81 and Santos Limited shrank 19 cents to $11.99 and Orica rose 2 cents to $24.76.

Commonwealth Bank of Australia declined 34 cents to $49.44 and Bank of Queensland added 1 cent to $6.70. ANZ slides 7 cents to $20.90. National Australia Bank dropped $1.34 or 5.6% to $22.48 and Westpac Banking Corporation closed down at 13 cents to $20.29.

NAB dropped 5.6% after it traded ex-dividend.

Echo Entertainment rose 6 cents to $4.40 after the casino operator agreed to hold an extra ordinary shareholder meeting demanded by billionaire James Packer.

Stockland fell 2 cents to $3.19, Leighton slumped 19 cents to $17.67 and Toll Holdings closed unchanged to $4.62.

Qantas unchanged to $1.49 and Virgin Australia Virgin Australia to 42.5 cents and Flight Centre increased 13 cents to $18.20.

QR National gained 8 cents to $3.41.