Australian Rate Increase, Commodities Rally

Mayank Mehta
06 Oct, 2009
New York City

Reserve Bank in Australia lifted rates surprising most market watchers. The RBI Governor Glenn Stevens focused on the economic acceleration and sharp rise in asset prices. Market interpreted the interest rate move as yet another confirmation of Asian economic recovery.

[R]7:00 AM Sydney, Australia – Reserve Bank in Australia lifted rates surprising most market watchers. The RBI Governor Glenn Stevens focused on the economic acceleration and sharp rise in asset prices. Market interpreted the interest rate move as yet another confirmation of Asian economic recovery.[/R]

World market gained after Australia lifted interest rates and sparked a rally in gold, silver and other base metals. Gold closed at a record high and is expected to register its ninth annual rise in a row.

Reserve Bank of Australia increased key overnight lending rate to 3.25% from 3%. The latest interest rate hike caught market by surprise as most analysts and economists were looking for no change in interest rate.

The Australian dollar gained to 14-month high of 88.76 U.S. cents on the latest interest rate move. The bureau of statistics is scheduled to release unemployment rate tomorrow.

The central bank estimates that the economy is expected grow at 0.5% in the current year and advance at 2.25% in 2010 and 3.75% in 2011.

ASX 200 index in Australia increased 18.30 or 0.40% to 4,591.60 and of the stocks in the index, 98 increased, 80 declined and 22 were unchanged. The index is up 23% for the year beating the European markets and U.S. indexes.

ASX Movers

Lynas Corporation Limited led the decliners in the S&P ASX 200 index with a loss of 5.8% followed by losses in Fortescue Metals Group Ltd of 5.2%, in David Jones Limited of 5.1%, in Gunns Limited 4.7% and in Aristocrat Leisure Limited of 4.5%.

St Barbara Limited led gainers in the S&P ASX 200 index with a rise of 7.3% followed by gains in Mirabela Nickel Ltd 5.7%, in Virgin Blue Holdings Limited of 5.6% and in Macquarie Media Group of 5.4%.

Other Movers

BHP Billiton plc the mining company added 0.9% to A$36.65 after prices of copper, gold and silver gained in international markets.

David Jones Limited fell 5.1% to A$5.54 after the department store said that for fiscal 2010 it continues to expect profit after tax to grow between zero and 5%.

Fortescue Metals Group Ltd declined 5.2% to A$3.40.

Gunns Limited the engaged in forest management and development dropped 4.7% to A$1.11.

Lynas Corporation Limited the mineral exploration company decreased 5.8% to A$0.64.

Macquarie Media Group added 5.4% to A$1.94.

Mirabela Nickel Ltd the mineral exploration and development rose 5.7% to A$2.76.

Rio Tinto Limited advanced 1.5% to A$57.73 after the mining company said is selling its 80% stake in Ghana''s only bauxite mine to Chinese minerals group Bosai.

Mongolian government approved long awaited copper and gold mining project operated by Canada based Ivanhoe and Rio Tinto. The $4 billion project is controlled 34% by Mongolian government. Rio controls 9.9% in Ivanhoe and is likely to increase its stake in the company to 45%.

St Barbara Limited the mining and sale of gold surged 10.9% to A$0.30.

Virgin Blue Holdings Limited the engaged in airline industry climbed 5.6% to A$0.47.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 17.31 or 0.18% to 9,691.80, Hang Seng index in Hong Kong increased 382.46 or 1.87% to 20,811.53, ASX 200 index in Australia increased 18.30 or 0.40% to 4,591.60. The FTSE Bursa KL Composite index in Malaysia was lower 3.72 or 0.31% to 1,212.73. CSI 300 index in China were closed today.

The Kospi Index in South Korea decreased 8.46 or 0.56% to close at 1,598.44 SET index in Thailand closed higher 12.92 or 1.80% to 731.39. JSE Index in Indonesia increased 47.73 or 1.92% to 2,528.15. The Sensex index in India increased 92.13 or 0.55% to 16,958.54.