Australia Lifts Rates; Third Increase

123jump.com Staff
01 Dec, 2009
New York City

Reserve Bank of Australia increased rates to 3.75%, its third monthly increase in a row. Manufacturing activities eased in November and housing approvals dropped 0.6% in October which surprised many economists.

[R]3:00 AM New York, 7:00 PM Sydney - Reserve Bank of Australia increased rates to 3.75%, its third monthly increase in a row. Manufacturing activities eased in November and housing approvals dropped 0.6% in October which surprised many economists.[/R]

Australian stocks rose 0.4% after Reserve Bank of Australia lifted its key rate by 25 basis points to 3.75%. The Aussie dollar fell 0.4% to 91.25 U.S. cents after the RBA suggested that rates may be on hold at its next meeting in February of 2010.

However, gains were pared after housing approvals dropped in October and manufacturing activity eased in November.

European markets rebounded for the second day in a row after investors fears of Dubai led financial contagion receded. Crude oil and gold gained more than 1.3% as investors returned to metals and commodities markets. The prospect of debt restructuring dimmed the fear of wider contagion.

Global markets rebounded after Dubai World initiated talks to restructure less than half of $59 billion of loans. Investors’ fears of wider contagion involving Russia, Ireland and Greece for now are ebbing.

Dubai World said that restructuring talks with lenders are “constructive” and is seeking to delay the repayment of $26 billion of loans.

For now there appears to be no talks to reduce the debt burden and at least nine lenders are involved in direct talks. HSBC, Standard Chartered Plc, Royal Bank of Scotland and Barclays are among these banks.

In Sydney trading ASX 200 Index rose 0.4% or 17.7 to 4,719.00.

Of the ASX 200 index shares, 94 gained, 95 dropped, and 11 were unchanged. Lend Lease led gainers in the index shares with a rise of 9% followed by Nexus Energy gaining 7.8% as gold prices advanced 0.6% to 1,183 per ounce.

Reserve Bank of Australia Hikes Rate to 3.75%

Reserve Bank of Australia reported today it has elected to increase its key rate by 25 basis points to 3.75% affective Wednesday. The central banks raised its rate third time in as many months and cited the stronger pace of economic recovery in Asia.

The RBA also noted that the economy is in a gradual recovery and the risk of serious economic contraction has passed.

“These material adjustments to the stance of monetary policy will, in the Board’s view, work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead,” said RBA.

Manufacturing Expansion Eases in November

Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index dropped 0.5 points in November to 51.2, expanding for the fourth straight month.

A reading above 50 represents expansion, while a measure below 50 shows contraction.

According to the report, manufacturers are still cautious on rebuilding inventories notwithstanding an increase in new orders recently.

Ai Group Chief Executive, Heather Ridout, noted that the “strength of the Australian dollar is proving to be an important barrier to stronger recovery.”

Australian Housing Approvals Fall 0.6% in October

Australian Bureau of Statistics reported today total dwelling units approved declined 0.6% from the previous month but rose 11.7% to 12,814 units in October.

Private sector houses gained 5% from a month ago and advanced 25.7% to 9,642 units in the month from the comparable year ago period.

Private sector other dwellings fell 19.3% in the month and fell 28.9% to 2,512 units in the review period.

Gainers & Losers

Lend Lease led gainers in the ASX 200 index shares with a rise of 9% followed by increases in Nexus Energy of 7.8%, in Elders Ltd. of 6.7%, in Platinum Asset Management of 6.7%, and Karoon Gas Australia of 6.6%.

Eastern Star Gas led decliners in the ASX 200 index shares with a fall of 6% followed by losses in Aquila Resources Ltd. of 5.9%, in Energy World Corp. of 4.8%, in Connecteast Group of 3.6%, and Macquarie Countrywide of 3.5%.

Energy stocks fell as crude oil prices fell 0.3% to $75.8 per barrel. Linc Energy fell 2.2% to A$1.52 and Atlas Iron dropped 2.1% to A$1.86.

Other Movers

Aquila Resources Limited fell 5.8% to A$10.29 after the exploration for coal said high grade gold and silver assay results from the recently implemented drilling program at the Back Forty Project in Michigan''s Upper Peninsula.

BHP Billiton plc the diversified natural resources company advanced 0.1% to A$41.34.

ConnectEast Group fell 3.5% to A$0.40.

Eastern Star Gas Limited the exploration for oil and gas declined 6.0% to A$0.78 and Elders Limited the rural and regional company increased 6.6% to A$0.16.

Nexus Energy Limited the oil and gas company climbed 7.8% to A$0.34.

Nufarm Limited decreased 3.1% to A$11.24 after the agricultural chemicals maker extended its deadline for talks on a A$2.6 billion takeover offer from China''s Sinochem by three weeks, but said it would be open to other offers after December 3.

Platinum Asset Management Limited rose 6.6% to A$5.13.

Qantas Airways Limited added 3.8% to A$2.70 after the airline company said Tuesday that its revenue per seat flown in October, a measure of how many paid seats it fills across all flights, increased by 3.4 points from a year earlier to 83.3%.