Higher Gold Prices Lift Stocks in Australia

123jump.com Staff
24 Nov, 2008
New York City

Stocks in Australia edged higher after gold and other metal prices gained. The surge in gold price lifted stocks of mining companies. Financial stocks rose as well after the U.S. decided to bailout Citigroup for the second time in less than two months.

[R]3:00AM New York, 7:00PM Sydney – Rising commodities and gold prices lifted trading sentiment in Australia. The U.S. bailout of Citigroup also supported financial stocks.[/R]

Australian stocks edged up as the U.S. government announced that it will guarantee Citigroup''s troubled assets pool worth $306 billion.

Gold stocks also gained as the precious metal price surged near $800 an ounce. However, other metal prices slid as metal prices remained depressed on lingering recession fears.

In Sydney trading ASX 200 increased 0.3% or 8.6 to 3,425.10.

Of the ASX 200 stocks 84 rose, 104 declined, and 12 were unchanged. Atlas Iron led gainers in the index shares with a rise of 22.2% followed by Babcock & Brown increasing 21.4%.

U.S. Guarantees Citigroup''s $306 billion Assets

The Federal Reserve Bank and the U.S. Treasury and the Federal Deposit Insurance Corporation jointly announced yesterday after a round of weekend talks that the government will guarantee Citigroup''s toxic assets- loans and securities that are backed by residential and commercial real estate worth $306 billion.

Government will also invest $20 billion in the lender from the Troubled Asset Relief Program in return for preferred shares and an 8% dividend.

As part of the deal, Citigroup''s executive will implement “enhanced executive compensation restrictions” and the Federal Deposit Insurance Corp. mortgage modification program.

“With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy. We will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks,” read part of the joint statement.

Metal Demand to Rebound in 2009 as China Picks Up

Rio Tinto chairman Paul Skinner said today strong demand for commodities may rebound in 2009 as the Chinese economy starts to pick up due to the recently announced Rmb4 trillion stimulus plan. The news was first reported on Bloomberg News.

Rio maintains that demand for metals will double by 2020.

Skinner said, “China will remain the main driver of mineral demand. I do not think that what we are seeing, in terms of this downturn, is the beginning of something very deep.”

Gainers & Losers

Atlas Iron led gainers in the ASX 200 index shares with a rise of 22.2% followed by increases in Babcock & Brown of 21.4%, in Babcock & Brown of 20.7%, in Lihir Gold of 18.3%, and Australia Wealth of 17.1%.

Lihir Gold rose after gold prices increased $43.10 to $791.8 per ounce.

Other resources stocks increased. Newscrest Mining soared 10%, Avoca Resources gained 10%, Paladin Energy edged up 7% and BHP Billiton increased 6.8%.

Axa Asia led decliners in the ASX 200 index shares with a fall of 21.5% followed by losses in Macquarie Communications of 16.6%, in Asciano Group of 15.3%, in Gunns Ltd. of 14%, and Straits Residential Ltd. of 13.3%.

Other energy stocks declined as oil prices fell $0.51 to $49.9 a barrel ahead of a forecasted OPEC production next week.