Australian Stocks Fall, Posco Warnings

123jump.com Staff
15 Oct, 2008
New York City

Stocks in Australia fell after South Korean steel giant Posco offered cautious outlook for the current quarter. Rio Tinto, the mining company also hinted weaker deamnd from China and Europe. Australia considers additional economic stimulus of A$10.4 billion.

[R]3:00AM New York, 7:30 PM Sydney – Australian stocks fall on mounting worres of global economic slowdown.[/R]

Stocks in Australia plummeted from a two-day rally led by commodity stocks on mounting concern that the country’s 17-year economic expansion will slow in the next three to nine months.

A recent research compiled by Westpac Banking Corp. and the Melbourne University’s Institute of Applied Economic Research and Social Research point to the weakest economic growth since the third quarter of 2002.

South Korean steel giant Posco reported a 40% profit increase in the three months ended September and offered a cautious outlook for the current quarter.

The outlook for the world economy was made gloomier after prominent university of New York University professor Nouriel Roubini on Bloomberg Television interview said the U.S. economy will slip into the worst economic recession in 40 years that will force unemployment to rise to 9% and house prices to fall another 15%. Bill Gates, the founder of Microsoft also commented that unemployment may rise above 9%.

Market Sentiment

In Sydney trading ASX 200 fell 0.81% or 35.2 to 4,300.00.

Of the ASX 200 index stocks 90 increased, 93 fell, and 17 were unchanged. Roc Oil Co. led advancers in the index shares with a rise of 15.08%.

Australia’s Leading Index Falls 0.1% in August

A research compiled by Westpac Banking Corp. and the Melbourne University Institute of Applied Economics and Social Research indicates that leading index of economic activities which measures economic growth in the coming three to nine months, dropped by 0.1% to 259.2 points in August.

The key measure rose by an annualized 2.5% in August, falling from 3.3% a month earlier.

A coincident index- a gauge of current economic activity- increased 0.4% in August from a month earlier.

Chief economist of Westpac Bill Evans said though the economy will slow in the coming three to nine months the decline is not likely to exceed the weakness in the years 2000 and 2001.

Australia Considers Additional Stimulus Package

Australia’s deputy Prime Minister Julia Gillard said today the government might add to the A$10.4 billion stimulus package unveiled yesterday to stimulate consumer spending in the pre-Christmas period.

From the first week in December the government will make A$4.8 billion one-time payment to pensioners and A$3.9 billion and A$1.5 billion payments will be made to families and homebuyers respectively.

Single pensioners will receive A$1,400 and pensioners will receive A$2,100 and low income and middle income families will be granted A$1,000 for each child under their care.

First time homebuyers will be entitled to A$14,000 and first time homebuyers who purchase a newly constructed house will get A$21,000 in tax incentives.

Gainers & Losers

Roc Oil Energy led advancers in the ASX 200 index shares with a rise of 15.08% followed by increases in Energy Resources of Australia of 15%, in AWB Ltd. of 14.22%, and Mincor Resources of 12.50%, and Macquarie Countrywide Trust of 12.40%.

Fortescue Metals led decliners in the ASX 200 index shares with a fall of 21.05% followed by losses in Valad Property of 19.13%, in Babcock & Brown of 16.76%, in Panaust Ltd. of 16.67%, and FKP Property of Ltd. of 16.63%.

Commodity stocks dropped on fears that global demand will wane. Oil prices also slumped 3.2% to $78.63 per barrel. Paladin Energy slipped 15% and Oz Minerals declined 9.82%.

Rio Tinto Iron Ore Production Up 17% in Q3

Rio Tinto reported today in the operational review for the three months ended September that global iron ore production rose 17% from the comparable period a year earlier as domestic production soared 20% to 40 million tons.

There was also record production for bauxite, hard coking coal and U.S. coal.

The acquisition of Alcan in the third quarter of 2007 spurred bauxite, alumina and aluminium production by 92%, 222% and 371% respectively.

U.S. coal and uranium production both surged 13% from a year ago.

Chief executive Tom Albanese said demand from China will likely slow on a tightened monetary policy and weak economic conditions in Europe. Rio Tinto tumbled 5.19%.