Australian Stocks, Dollar Up; Woolworths Falls

Mayank Mehta
20 Oct, 2009
New York City

The Reserve Bank of Australia noted in its latest statement after the interest rate hike that maintaining low interest rates many not be the prudent. Woolworths

[R]1:00AM New York, 6:00PM Sydney – The Reserve Bank of Australia noted in its latest statement after the interest rate hike that maintaining low interest rates many not be the prudent. Woolworths’ sales increase slowed after petrol prices fall. Oil Search completed its $825 million offering.[/R]

Stocks in Australia rallied as metal prices soared and the Australia dollar crossed 93 U.S. cents and closed at 92.84 U.S. cents.

Investors shifted to commodities as the U.S. dollar dropped to the 14 -month low against the euro. Copper prices advanced 4.3% and crude oil traded near $80 per barrel.

Reserve Bank of Australia also reported in minutes for the monetary policy meeting held on October 6 that it had decided to raise its interest rates on inflation concerns. Economists forecast that the key rate will be hiked by a quarter percentage point.

In Sydney trading ASX 200 Index increased 1.1% or 53.4 to 4,846.20. Of the index stocks, 146 gained, 37 declined, and 17 were unchanged. Platinum Australia led advancers as commodity stocks gained.

RBA Views Low Interest Rates As Imprudent

The Reserve Bank of Australia reported today in minutes for the monetary meeting of the board held on October 6 that the current expansionary setting to the monetary policy could “threaten the achievement of the inflation target over the medium term.”

The RBA also noted that the current monetary policy could also be detrimental to long term economic outlook.

“This meant that the balance of risks was now such that the current expansionary setting of policy was no longer necessary, and possibly imprudent,” said the RBA.

Monetary authorities note that though the strong Aussie could help contain inflation in the interim, underlying inflation is still above the target over the medium term. The RBA in its last meeting increased the rate 0.25% to 3.25% and appears to be ready to increase the rate again in the next meeting.

Woolworths Sales Rise 4.2% in Q1

Woolworths reported today for the quarter ending in September sales increased 4.2% to A$13.4 billion from A$12.8 billion in the comparable quarter a year ago.

However, the first quarter sales growth was the slowest since the company went public in 1993.

Australian food and liquor sales edged up to A$9 billion from A$8.35 billion a year earlier. Fuel sales dropped 16% to A$1.4 billion in the review period on falling fuel prices, and revenue from local hotels increased 1% to A$303 million.

Consumer electronic business generated 13% to A$462 million. The retailer’s New Zealand sales gained 5.4% to $A1.1 billion.

Woolworths’ chief executive Michael Luscombe forecasts profit increase of 11% this year despite the effects of stimulus weakening in the second half of this year.

Wesfarmers Coal Production Rise 14.1% in Q1

Wesfarmers reported today in its first quarter production report coal production soared 14.1% to 802,000 tons from the previous three months on higher demands.

Coking coal production advanced 0.9% to 1.8 million tons from 1.7 million tons in the comparable year ago period.

ASX Movers

Oil Search Limited led the decliners in the S&P ASX 200 index with a loss of 7.2% followed by losses in Pacific Brands Limited of 5.1%, in James Hardie Industries N.V of 2.7%, in Lynas Corporation Limited 2.6% and in Nexus Energy Limited 2.5%.

Platinum Australia Limited led gainers in the S&P ASX 200 index with a rise of 7.8% followed by gains in St Barbara Limited 6.3%, in Challenger Financial Services Group Limited of 6.2% and in Atlas Iron Limited of 5.7%.

Other Movers

BHP Billiton plc added 2.1% to A$39.91 after metals and energy prices climbed in the international markets. Crude oil crossed $79 a barrel in New York and gold and silver traded near their recent highs.

Challenger Financial Services Group Limited increased 6.2% to A$3.90 after it said the total assets under management soared 50% in the September quarter as investment markets improved.

Oil Search Limited slipped 7.2% to A$6.26 after the energy exploration company completed the placement of 151.7 million new shares priced at A$5.90 a share to raise A$895 million. The company also dropped plans to sell 3.5% stake to Abu Dhabi based International Petroleum Investment Corp.

The company is in a partnership with ExxonMobil to develop a natural gas filed in Papua New Guinea.

Rio Tinto Limited advanced 3.3% to A$66.80 after copper, gold and silver closed higher.

Rockland Richfield Ltd decreased 15.3% to A$0.36 after Essar Group of India dropped from the bidding war to acquire the coal mining company. Jindal Steel & Power Ltd based in New Delhi, India has offered A$0.42 a share for the rest of the company that it does not own. Jindal controls nearly 13% of Rockland.

Webfirm Group Limited the online display advertising sales and publisher plunged 41.6% to A$0.03 after sales in the fiscal first quarter declined 37% from a year ago to A$400,000. The company lost its advertising feeds from Searchworld and is suing the advertising company for the unpaid A$500,000 in fees.

Woolworths decreased 0.8% to A$30.28 after the retailer reported weakest sales gain in fifteen years.