Australian Stocks Rise, Rate Cut Hopes

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

Australian stocks rose 1.3% on the hopes that the U.S. will lower rates today. JP Morgan Chase estimated fourth quarter economic growth to fall 3% and decline 4% in the first quarter of 2009. Australia is expected to invest $1 billion in mortgage securities.

[R]3:00AM New York, 7:00PM Sydney – Australian stocks rose on market speculation that the U.S. will lower rates.[/R]

Australian stocks rose 1.3% driven by commodity stocks on market speculation that the U.S. may lower benchmark interest rate to 1% to prevent from the fallout in financial system to wider economic recession.

Crude oil and metal prices increased.

Market Sentiment

In Sydney trading ASX 200 rose 1.3% or 51 to 3,845.60.

Of the ASX 200 index stocks 110 rose, 80 declined, and 10 were unchanged. Roc Oil Co. led advancers in the index shares with a rise of 18.5% after crude oil prices gained 3.5% to $64.8 per barrel.

Australia''s GDP to Drop to –3% in Q4

JP Morgan estimated Australia''s gross domestic product growth to fall 3% in the fourth quarter ending in December and decline 4% in the first quarter of 2009 on slowing domestic demand.

Growth for 2008 is projected to drop to 2.1% from 2.5% projected earlier, while the economic growth estimate for 2009 is lowered to 0.7% from 1.4%.

The report notes that household spending will stagnate in 2009. Last week, JP Morgan said it expects the unemployment rate to top 9% by the end of 2010.

JP Morgan chief economist Stephen Walters said in a statement, ""The sand clogging the gears of the local financial system, along with the biggest dive in equity prices for more than two decades, and the 10% decline in house prices we now anticipate, will be dead weights on household spending and confidence for some time.""

Analysts forecast that the Reserve Bank of Australia will cut its key rate on Tuesday next week.

RBA to Invest A$1 billion in Mortgage Debt

The Australian Office of Financial Management reported that it is interested in investing up to A$500 million each in residential mortgage backed securities issues proposed by the Australian and New Zealand Banking Group, HSBC and Macquarie Bank for which FirstMac Ltd. will be the mortgage manager and service.

AOFM selected Westpac Banking Corporation and Credit Suisse as the joint lead managers for an issue for which Members Equity Bank Pvt Ltd will be the mortgage manager and servicer.

Proposed issues are expected to be priced by mid-November 2008.

Gainers & Losers

Roc Oil led advancers in the ASX 200 index shares with a rise of 18.5% followed by increases in Minara Resources of 17.7%, in David Jones Ltd. of 13.8%, in Riversdale Mining of 13.7%, and Gloucester Coal of 13.7%.

Roc Oil and other commodity stocks increased as crude oil prices gained 3.5% to $64.8.

Gold prices fell US$2.40 to US$740.5 per barrel but copper prices gained US$8.5 per ton. Centennial Coal advanced 13.1%, Felix Resources increased 12.2%, and Avoca Resources surged 9.5%.

ING Industrial led decliners in the ASX 200 index shares with a fall of 28.4% followed by losses in Aristocrat Leisure of 28%, in Macquarie Media of 23.5%, in Mirvac Corp. of 23.4%, and Macquarie Countrywide of 21.3%.