Australian Markets Advance, Leighton Plunges 10%

Marcus Jacob
03 Oct, 2013
New York City

Australian stocks traded higher and the dollar gained as Asian markets shift focus to domestic events. Australian service industry growth eased in September. Leighton in a lengthy statement denied allegation that it participated in corrupt practices to win contracts in Iraq, Indonesia and Malaysia.

[R]4:55 Sydney – Australian stocks traded higher and the dollar gained as Asian markets shift focus to domestic and regional economic trends. Australian service industry growth eased in September. Leighton in a lengthy statement denied allegation that it participated in corrupt practices to win contracts in Iraq, Indonesia and Malaysia.[/R]

Australian stocks closed higher as commodities prices recovered and currency market focused on the ongoing political stalemate in the U.S.

U.S. dollar, the reserve currency, traded near a 8-month low as Congressional politicians play fast-and-loose and shut down the government to score ideological points.

World’s patience will run out if the U.S. government closure lasts longer than two weeks and market indexes will begin sharp correction and that may force politicians to take some steps.

The ASX 200 index closed up 19 points to 5,235 and in trading 552 million shares changed hands worth $3.2 billion.

A private survey tracking Australian service industry showed a smaller rate of contraction in September.

The Performance of Services Index tracked by Australian Industry Group increased 8.1 points to 47.1. Any reading below 50 indicates contraction and above that mark indicates expansion.

Australian dollar increased to 93.98 U.S. cents as commodities prices rose and investors hoped of a quick resolution of a political stalemate in the U.S.

U.S. dollar is used as a reserve currency by many countries around the world on the belief that the U.S. government and political process will always work to implement sound economic policies.

However, in the last ten years the U.S. government has racked up the largest debt among all nations in the world and conducted international wars using borrowed funds and has failed to produce an annual budget for four years in a row.

Economists around the world are wondering how long the world will put up with this reckless behavior by the U.S. politicians and how long the dollar will retain its reserve status.

Stocks in Review

Leighton Holdings Limited plunged 10.4% to $17.54 after a report published by Fairfax Media alleged company’s corrupt practices in obtaining contracts in Indonesia, Malaysia and Iraq and the subsequent cover ups.

The company in a statement denied allegations and formed CEO Wal King said he was not aware of the practices and “denied all allegations of wrongdoing against him.”

Linc Energy declined 1.4% to $1.24 and the company said it signed a deal to buy Blair Athol Mine tenure in central Queensland from a joint venture that includes Rio Tinto. The mine is estimated to produce 3 million tons of thermal coal a year.