Oil, Metals, and Dollar Lift Australia

123jump.com Staff
14 Sep, 2007
New York City

Australian stocks gained on the rising metals, oil, and local dollar. Macquarie, largest financial services company, said that the first profit is likely to jump 40% on strong investment banking and management fees. For the week Australian dollar jumped 1.9% against the U.S. dollar and nearly 4% against the yen. Australian dollar fell in the morning trading after the Bank of England lent emergency funding to house lender Northern Rock. Food and groercy prices are expected to rise in Australia.

[R]12:30PM New York, 1:30AM Sydney - Australian stocks rose for the second day, as prices for metals and oil increased and the U.S. dollar declined.[/R]

In Sydney trading ASX 200 Index gained 1.22% or 72.2 to 6,306.80. The Aussie dollar closed stronger today, recovering from early morning lows on the back of solid demand for the currency from Japan and further weakness in the U.S. dollar. The Aussie dollar traded at $0.8419/25 against the dollar, up from yesterday''s close of $0.8396/02.

During the day, it traded between a low of $0.8344 and a high of $0.8425. News on UK mortgage lender Northern Rock''s to borrow capital from the Bank of England, lender of the last resort, due to the exposure to the troubled U.S. sub-prime mortgage sector had put pressure on the Aussie dollar. Additional news that Northern Rock would be given a short-term credit line to allow it to maintain operations had initially sent ripples through the market, putting pressure on high-yield currencies such as the Australian dollar.

However the Aussie dollar''s fortunes soon changed on the back of demand out of Japan. The demand from Tokyo helped lift the Aussie against the U.S. dollar by boosting confidence in the market and sentiment towards risk. News of a weakening U.S. dollar against expectations that the Federal Reserve may cut interest rates from 5.25 % next week also helped turn the tide in the favor of the Aussie dollar.

Lower interest rates can weaken a currency by giving investors lower returns on investments denominated in that currency.

Of the Sydney shares, Commander Comm led the gainers with a rise of 7.22% followed by Centennial Coal at 6.83% higher, APN/UKA European rose 6.36% with Mount Gibson and Macquarie 6.27% and 6.18% respectively. Mining giant BHP Billiton and Santos Ltd led from the front riding on increases in the prices for metals and oil as the U.S. dollar declined. BHP, the world''s biggest mining company and Australia''s largest oil producer, rose 1.94% and Rio Tinto Group, the third-largest Australian oil producer, added 1.43% and Santos, gained 2.30%.

Crude closed above $80 a barrel in New York for the first time, after Hurricane Humberto shut three refineries in Texas.

Macquarie, Australia''s largest securities firm jumped 6.2% on the predictions that its first half earnings will be stronger on growth in investment banking fees and the specialist funds it manages. It is expecting an around 40 percent jump in net income within the six months ending September 30 from A$730 million ($610 million) a year ago.

Of the ASX 200 index stocks, Incitec Pivot Lt fell 1.48% followed by Bolnisi Gold down 2.19%, Tishman Speyer sank 2.20 % followed by Duet Group down 2.33% and Sino Gold Mining lost 3.59%.