RBA Left Rates Unchanged, Stocks Decline

123jump.com Staff
01 Jul, 2008
New York City

The Reserve Bank of Australia left its key rate at 7.25% but noted that inflationary pressures are building in the economy. The CPI index for the year ending in March was at 4.2% and since then the inflation has been buidling. Australian stocks fell nearly 18% in the first half as global credit market worries dragged financials lower. Of the ASX 200 index stocks, Connecteast Group led the gainers with a rise of 11.1% and ABC Learning led the decliners with a fall of 16%.

[R]3:00AM New York, 7:00PM Sydney – The RBA kept its key rate at 7.5% but noted of the rising inflationary pressures in the economy.[/R]

Market Sentiments

ASX 200 index fell 1.5% or 76.4 to close at 5,138.90. The preliminary market turnover was 1.72 billion shares worth $5.29 billion, with 602 stocks up, 567 down and 299 unchanged. The most traded stock was Cluff Resources, with 129.88 million shares worth $2.65 million.

Rio Tinto Doubles Iron Ore Prices

The world''s second largest iron ore exporter, Rio Tinto and its customers in Asia have settled on a 96.5% increase iron ore lump prices of and 80% increase for fine ore prices for all deliveries beginning April 1 of this year. Japanese and South Korean manufacturers agreed to a price increase, earlier reached with Chinese steel customers.

Sam Walsh, chief executive of Rio Tinto''s Iron Ore group, said: ""These agreements are a strong endorsement of the settlement reached last week and reflect the very strong demand for our products across the world''s fastest growing markets"".

Rio Tinto hopes to increase production to 320 million tons by 2012 and 420 million a year after that.

Rio Tinto share rose 1.5% and rival miner BHP Billiton which is still in discussion with its customers rose 1.6%.

Reserve Bank Maintains Rates

The Reserve Bank of Australia today decided to maintain official interest rates at 7.25% for another month. The central bank raised interest rate 25 basis points in March and by the same amount in February of this year.

In a statement, central bank Governor Glenn Stevens said inflation in Australia had been high over the past year in an environment of limited spare capacity and strong growth in demand.

Consumer Price Index for the twelve months ending in March was at 4.2% but is expected to increase on a sharp gain in food and energy prices.

""In these circumstances, the Board has been seeking to restrain demand in order to reduce inflation over time. As a result of earlier decisions by the Board, additional rises in market interest rates and tougher credit standards for some borrowers, there has been a substantial tightening in financial conditions since the middle of last year,"" he said.

The governor also noted credit concerns resurfacing in international financial markets and rising oil prices, which it said, was likely to boost inflation. The central bank however also noted that the rising price of fuel is restraining demand in the economy moderating economic growth this year.

Gainers & Losers

Of the ASX 200 index stocks, Connecteast Group led the gainers with a rise of 11.1% followed by increases in Babcock & Brown of 7.8%, in Resmed Inc of 6.9%, Murchison Metals in of 6.8% and in Qantas Airways of 6.6%.

Of the index stocks, ABC Learning led the decliners with a fall of 15.5% followed by losses in Goodman Group of 9.4%, in Valad Property of 7.5%, in Suncorp Metway Limited of 8.7% and in Incitec Pivot of 6.5%.

Allco Gets Loan Extension

Troubled fund manager, Allco Finance Group has been granted further reprieve by its lenders who agreed to extend its debt repayment deadline.

Allco disclosed today in a statement that its senior banks had extended the deadline for its $250 million bridge facility and the review period till the end of this month.

The company claims that it is on course to meet its debt repayment schedule that targets lowering its senior debt to $400 million by September 2009.

The financial group agreed to pay additional $31.2 million to banks yesterday from the proceeds of completed asset sales, including a portfolio of European wind farms, bringing the total repayments to $177.1 million in the last three months.

Allco''s drawn borrowings under its senior debt facilities, after repayment of the $31.2 million, would be $830.6 million and additional facilities of $63.4 million.

Allco shares closed up 3.8% while fund manager Babcock & Brown shed 3.7% today after agreeing to higher interest rate on $2.8 billion of debt yesterday.

Qantas Deploys Newer Aircrafts

Australia''s largest airline, Qantas today announced it would replace its Boeing 747-300 aircraft on the Perth-Melbourne route with brand new Airbus A330-200 aircraft from today.

Qantas Regional General Manager Western Australia, Mr Ian Gay, said 13 out of 48 weekly return Perth-Melbourne services would be operated by the new aircraft. A further 10 return services each week would be upgraded from B737-400 to B767-300 aircraft.

Qantas'' share rose 6.9%.

Centro Sells Malls

Centro Properties Group said that it plans to sell five of its Australian shopping malls to repay some of the debt that is due. Centro said proceeds from the sale of the shopping centers would be used to first retire outstanding loan balances of $6.6 billion. The MSC9 fund is reeling under debt and has extended its debt repayment for the fifth time in the last one year.

After repayment of debt, fees and costs, the surplus would be distributed to investors. As of December 31 the malls were worth $309 million. Centro is seeking to repay $6.6 billion of debt. Last month Centro won its fifth extension on its deadline.

Centro Properties share fell 4.1%.

Timbercorp Confident Of Good Results

Agribusiness investment company Timbercorp Ltd today that it expects its total project revenues to increase to around $425 million for the year ending 30 September 2008.

This follows a sell-out of its forestry project to June, which was oversubscribed 24% from a year ago to $51 million.

The company said the increased project revenue figure would comprise recurrent contractual revenues from past projects of $300 million, up from $243 million in 2007.

New sales revenues for the nine months to June of approximately $128 million, down from $145 million for the full year in 2007 reflecting a reduced number of project offerings this year.

Timbercorp share rose 3.3%.

Macarthur Welcomes Posco''s Investment

Macarthur Coal today welcomed Posco investment after the Korean steel giant agreed to purchase 10% interest in Macarthur Coal from Talbot Group Investments at a price of $20 per share.

Macarthur Coal Chairman, Keith De Lacy said, ""We have a long term relationship with POSCO as a customer and we are pleased they have expanded the relationship to become a substantial shareholder of Macarthur Coal.""

Programmed Maintenance Services Confident Of Earnings

Programmed Maintenance Services today announced that it was confident of its 2009 earnings forecasts following the acquisition of engineering maintenance company SWG today.

Programmed Maintenance Services said the transaction and the sale of Barry Brothers, finalized earlier today are crucial to increase revenue and earnings.

The company noted in a statement, ""They will increase the company''s exposure to the energy and resources sectors; will be earnings accretive in the current financial year to March 2009; and will reduce the company''s borrowing by $25 million.""

Programmed has guided 29% increase in operating earnings to $74 million in the current fiscal year and revenue gain of 33% to $1.17 billion and earnings per share increase of 10.4% to 40.3 cents.