Australian Stocks Track Lower

Darlington Musarurwa
17 Nov, 2009
New York City

The index of business confidence in Australia gains in September. Reserve Bank of Australia noted uncertain outlook for the interest rate increase. Stocks declined. China approves Baosteel

[R]3:00 AM New York, 7:00 PM Sydney – The index of business confidence in Australia gains in September. Reserve Bank of Australia noted uncertain outlook for the interest rate increase. Stocks declined. China approves Baosteel’s investment in Aquila.[/R]

Australian market averages decreased 0.5% led by bank stocks after the Reserve Bank of Australia noted that it was uncertain on the pace of interest rate adjustment it will take.

Economists have forecasted the central bank would increase its key rate by 25 basis points at its next meeting.

In Sydney trading ASX 200 Index fell 0.5% or 25.8 to 4,729.40.

Of the ASX 200 index stocks, 68 gained, 110 dropped, and 22 were unchanged. Panoramic Resources led advancers in the index shares with a rise of 8.7% after commodity and energy prices increased.

Gold prices advanced 2% to 1,139 per ounce and crude oil prices soared 3.9% to %79.3 per barrel.

The Australian dollar fell 0.9% to 92.87 U.S. cents.

RBA Uncertain of Interest Rate Adjustment

Reserve Bank of Australia reported today in minutes for the monetary policy meeting held on November 3. The central bank is considers adjusting the cash rate over time, however, it remains uncertain of the pace of adjustment.

After the meeting, the bank lowered its key rate by 25 basis points to 3.5%.

According to the RBA, business and consumer confidence will likely be fragile, while economic activity might wane more than forecasted “as the effects of stimulus measures faded.”

“Looking ahead, members expected that if economic conditions evolved as expected, further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remained an open question,” noted the RBA.

Australia’s Business Confidence Rises in September

National Australia Bank reported in its survey of conditions among small and medium enterprises that the business conditions index rose 15 points to turn positive at 5 index points in the three months to September.

About 25% of SMEs reported good or very good conditions and 20% had poor or very poor conditions. Business conditions rose 22 index points to +15 points buoyed by finance, wholesaling and health.

Transport, retail, construction and manufacturing were however the weakest.

All states, except Western Australia, recorded and improvement in business conditions in the September quarter.

Businesses in Victoria and NSW improved, while those in Western Australia declined to -10 from -6.

Outlook for profits in the review period rose to +27 from +1.

China Okays Baosteel, Aquila Deal

Aquila Resources reported today that China has approved Baosteel’s acquisition of a 19.99% stake worth $285.6 million in Aquila.

Australia''s Foreign Investment Review Board approved the deal in October.

The deal is Baosteel''s first major international strategic investment in a public company to secure long-term supply of raw materials.

Gainers & Losers

Panoramic Resources led gainers in the ASX 200 index shares with a rise of 8.7% followed by increases in Emeco Holdings of 5.9%, in Murchison Metals of 5.3%, in Medusa Mining of 4.7%, and OM Holdings of 3.5%.

Commodity stocks rose as crude oil prices increased 3.9% to $79.3 per barrel and gold prices edged up 2% to 1,139 per ounce. Aquarius Platinum jumped 3.2% to A$5.75, Atlas Iron climbed 2.9% to A$1.94 and Paladin Energy rose 2.8% to A$4.42.

Elders led decliners in the ASX 200 index shares with a fall of 5.6% followed by losses in Gunns Ltd. of 4.9%, in Paperlinx of 4.6%, in Molopo Energy of 4.1%, and Macquarie Countrywide of 4%.

Other financial stocks declined. Commonwealth Bank of Australia decreased 2.5% to A$56.64 and Westpac Banking fell 2.3% to A$24.70.

Other Movers

BHP Billiton plc added 1.0% to A$40.50.

Elders Limited the rural and regional company fell 5.5% to A$0.17.

Emeco Holdings Limited the earthmoving equipment rental services provider rose 5.8% to A$0.90.

Gunns Limited the forest management and developer dropped 4.8% to A$0.98.

Mount Gibson Iron Limited rose 0.6% to A$1.53.

Murchison Metals Limited climbed 5.2% to A$1.79 after the miner said that the environmental approval process had been confirmed for the terrestrial port and rail components of Oakajee Port & Rail''s mid-west infrastructure project.

Panoramic Resources Limited a miner increased 8.6% to A$2.51.

Perpetual Limited increased 2.7% to A$34.12 after the Australian fund manager was upgraded to “hold” from “sell” at Royal Bank of Scotland Group Plc.

Rio Tinto Limited advanced 0.7% to A$73.40.