Australian Holds Rates at 3.5%, Fortescue Defers Capital Spending

Marcus Jacob
04 Sep, 2012
New York City

Australian markets were under pressure and closed down 0.5%. Reserve Bank of Australia left its key lending rate unchanged at 3.5% for the third month in a row. Fortescue Metals joined other mining companies and deferred its capital spending plan as the iron ore prices fall to a 3-year low.

[R]7:30 PM Sydney – Australian markets were under pressure and closed down 0.5%. Reserve Bank of Australia left its key lending rate unchanged at 3.5% for the third month in a row. Fortescue Metals joined other mining companies and deferred its capital spending plan as the iron ore prices fall to a 3-year low.[/R]

Reserve Bank of Australia held its key lending rate at 3.5% for the third month in a row. The central bank highlighted that the effects of previous cuts have still not worked through the system and it sees no hurry to cut rate in the immediate future.

The central bank also focused in its statement on the strength in the domestic economy but highlighted the rising risks from the Chinese economic slowdown.

RBA Governor Glenn Stevens noted in a statement, “Recent indicators have been weaker, which has added to uncertainty about near term growth.”

Australia is scheduled to release second quarter economic growth tomorrow and market expectations are high on the sustained consumer spending and rising export volumes of iron ore, despite the fall in prices.

Markets were cautious after the third largest iron ore mining company Fortescue decided to defer capital spending between $1.6 billion and $4.6 billion in the fiscal 2013. The company blamed the recent iron ore price decline as too swift.

The ASX 200 index decreased 26.20 to 4,303.50 and the broader All Ordinaries slumped 25.99 to 4,325.60.

The Australian dollar decreased to US$1.0223, a five week low before rebounding to close at US$1.027.

Stock Movers

BHP Billiton Limited increased 15 cents to $31.56 and, Rio Tinto Limited climbed 52 cents to $50.37 and Fortescue Metals Group declined 15 cents or 4.2% to $3.41.

Iluka Resources closed unchanged at $9.44 and Lynas Corporation Limited slid 0.5 cents to 60 cents. Newcrest Mining lowered 1 cent to $25.01. Kingsgate gained 13 cents to $4.45 and Whitehaven Coal dropped 17 cents or 5.3% to $3.05.

Transfield Services decreased 6 cents to $1.70 billion; engineering contractors WorleyParsons declined 59 cents to $25.41 and Monadelphous Group advanced 28 cents to $20.12.

Oil Search Limited slipped 8 cents to $7.40 and Santos Limited increased 19 cents to $11.44 and Woodside Petroleum gained 12 cents to $34.70. Sundance Energy slid 1 cent to 69 cents.

Seven West Media plunged 8 cents or 5.7% to $1.32, Ten Network added 0.5 cent to 38 cents and Fairfax Media closed unchanged at 42 cents.

Harvey Norman Holdings up 2 cents at $2.01, Woolworths jumped 25 cents to $30.25 and Kathmandu added 3 cents to $1.45.

Commonwealth Bank of Australia declined 36 cents to $54.63 and Bank of Queensland slid 7 cents to $7.53. ANZ dropped 50 cents to $24.34. National Australia Bank slipped 20 cents to $25.10 and Westpac Banking Corporation slumped 53 cents at $24.32.

Macquarie Group decreased 26 cents to $27.29. Perpetual Limited increased 18 cents to $26.90 and the financial services reported profit dropped 57% on restructuring charges.

David Jones Limited down 1 cent $2.38 and Wesfarmers slipped 7 cents to $36.08. Billabong International Limited lowered 3 cents to $1.29. Breville Group edged down 1 cent to $5.43. Harvey Norman slid 2 cents to $2.01.

Toll Holdings gained 5 cents to $4.66, Leighton plummeted 41 cents to $15.42 and property developer Mirvac Group closed up 1 cent at $1.37.

Qantas slid 3 cents to $1.14 and Flight Centre slumped 32 cents to $23.37 and Virgin Australia soared 2.5 cents or 5.9% to 45 cents.

QR National down 2 cents to $3.50 and Telstra lowered 2 cents to $3.86.