Weak Australian Stocks, Hopes of Lower Rates

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

Stocks in Australia fell 1.6% ahead of interest rate decision. ABS reported sharp fall in operating profit at Australian companies in the quarter ending in September. BHP and Rio Tinto fell on the worries that industry will be forced to lower iron ore prices.

[R]3:00AM New York, 7:00PM Sydney - Australia’s manufacturing activity drops 7.7 points to 32.7 in November.[/R]

Australian stocks fell as investors locked gains after last week’s rally ahead of interest rate decision tomorrow. A government report showed that operating profit among domestic companies plunged to 5.2% in the three months to September from 31.3% in the previous three months.

In Sydney trading ASX 200 index fell 1.6% or 61.3 to 3,681.20.

Of the ASX 200 index stocks, 70 rose, 116 declined and 14 were unchanged. Babcock & Brown led advancers in the index shares with a rise of 26.7%.

Operating Profit Falls 5.2% in Quarter to September

Australian Bureau of Statistics reported today that the seasonally adjusted estimate of company gross operating profits plunged to 5.2% in the three months to September from 31.3% the previous quarter.

Wages and salaries gained 1.4% in the quarter, while inventories increased 0.9%. The ABS also said the seasonally adjusted estimate for manufacturing sales of goods and services dropped 1.1%.

The wholesale trade’s seasonally adjusted estimate of sales of goods and services fell 0.1%.

Manufacturing Activity Falls 7.7 points in November

Australia Industry Group reported today that the Australian Industry Group - PwC Australian Performance of Manufacturing Index declined by 7.7 points to 32.7 in November, falling for the sixth straight month.

All the 12 sectors surveyed contracted.

Australian Industry Group (Ai Group) Chief Executive Heather Ridout said, “The fall in new orders is alarming, adding that the deteriorating conditions reinforced the need for “a significant cut in interest rates” when the central bank meets tomorrow.

Ai Group noted that manufacturing remains under severe pressure as business and consumer confidence is falling including slow domestic and international demand for manufactured products.

Gainers & Losers

Babcock & Brown led advancers in the ASX 200 index shares with a rise of 26.7% followed by increases in Babcock & Brown of 21.9%, in Fortescue Metals of 21.4%, in Minara Resources of 17.9%, and Kagara Ltd. of 17%.

Financial stocks increased as investors bet that the Reserve Bank of Australia will cut its key rate more than forecasted tomorrow.

Resource stocks advanced as gold prices edged up $7.70 to $819 per ounce.

Transfield Services led decliners in the ASX 200 index shares with a fall of 64.4% followed by losses in Panaust Ltd. of 15.6%, in Sunland Corp. of 13%, in OM Holdings of 11.2%, and Platinum Australia of 10.3%.

Commodity stocks declined as metal and oil prices declined. Copper futures fell 0.7% on Friday last week, while crude oil prices slipped to $54.4 per barrel. Centennial Coal plunged 6.9% and Rio Tinto dipped 8.4%.

BHP, Rio Tinto to Cut Contract Prices

Bloomberg News reported today that the mining companies analysts are expecting BHP Billiton and Rio Tinto will cut contract prices of coking coal by a third next year on falling demand for steel.

Prices are forecasted to plummet to $200 a metric ton in the year beginning April 1 from $300 a ton this year.