Australian Stocks Surge 6%, Qantas Hedging Loss

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

Stocks in Australia surged 6% after metals and oil prices rallied. The second rescue package for Citigroup lifted the mood in trading and China plan to invest directly in the local stocks lifted trading sentiment. Qantas plans to cut its capacity and said it hedged fuel for 2009 at $106 a barrel.

[R]3:00AM New York, 7:00PM Sydney - Australian stocks rise on the rally in metal and oil prices. Qantas cuts profit forecast to A$500 million on falling demand.[/R]

Australian stocks extended gains as oil and metal prices increased after the U.S. offered second rescue package to the troubled Citigroup.

In Sydney trading ASX 200 advanced 5.8% or 198.3 to 3,623.40.

Of the ASX 200 stocks 149 rose, 43 declined, and 8 were unchanged. Aquarius Platinum led gainers in the index shares with a rise of 29.6% after metal prices gained.

Qantas Cuts Capacity and Profit Forecasts

Qantas chief executive officer Geoff Dixon said today the company will reduce capacity equivalent to grounding 10 aircraft on the fall in demand.

Capacity will be reduced by foregoing the lease of two A330-200 aircraft, suspend the planned domestic market growth and changing the route network to free up the equivalent of six B747-400s, three B767-300s and one A320-200 aircraft between 2008 and mid-2010.

Dixon revised downwards the projected profit before tax for the fiscal 2009 to A$500 million on weak demand for international travel. He noted that Qantas domestic operations- Jetstar Qantas Frequent Flyer and Qantas Freight- have been satisfactory.

According to the company''s statement, actual flying in the next six months will be 4% below the equivalent period in 2008 and the airline plans to limit its current staff reduction to 1,500 jobs.

In addition, chief executive officer designate of Qantas Alan Joyce said the recent falling oil prices have been offset by the global slowdown and reduced demand.

Joyce added, “Our fuel bill for 2008/09 will still be A$750 million higher than last year. We have undertaken significant fuel price and foreign exchange hedging to protect against the current market volatility. Our forecast fuel exposure in 2008/09 is currently 97% hedged at a worst-case crude oil hedge rate of US$106 per barrel, including option premium.”

Qantas closed down 3%.

Oz Minerals Slashes Spending on Mines By A$680 million

Oz Minerals reported today that it will defer capital projects of approximately A$495 million after a review of capital and operating expenditure that was announced recently to the market.

The company formed through the merger of Oxiana and Zinifex, hopes to save annually $54 million through merger.

Australian Dollar at $0.6440 Against U.S. Dollar

The Australian dollar rose to 64.40 American cents from 62.83 cents in Friday trading.

Gainers & Losers

Aquarius Platinum led advancers in the ASX 200 index shares with a rise of 29.6% followed by increases in Lynas Corp. of 28%, in Independence Group of 26%, in OM Holdings of 22.6%, and Fortescue Metals of 20.9%.

Commodity stocks increased after crude oil prices for January delivery jumped 9.2% to $54.50 per barrel yesterday. Copper futures for March delivery increased 5.9% and gold prices soared $36 to $828 per ounce.

Atlas Iron gained 15.5% and Nexus Energy increased 14.9% as a result.

Financial stocks rose after the bailout of Citigroup by the U.S. government. Australia & New Zealand Bank of edged up 12.8% and Commonwealth Bank of Australia soared 12.5%.

Babcock & Brown led decliners in the ASX 200 index shares with a fall of 17.1% followed by losses in Babcock & Brown of 11.8%, in Australian Agriculture Co. Ltd of 9.9%, in Timbercorp. of 9.6%, and Tishman Speyer of 8.6%.

Realty stocks declined. Valad Property shed 5%, Lend Lease fell 4.3% and Australand Property dropped 3.2%.