Rate Worries in Australia; Woolworths Sales Up

Darlington Musarurwa
27 Jan, 2010
New York City

Global markets concern overshadowed the earnings from local companies in Australia. Consumer price index increased 0.5% in December and leading index of the economy increased 7.6% in November. Woolworths Ltd sales increase slowed to 4.1% rise.

[R]3:00 AM New York, 7:00 PM Sydney – Global markets concern overshadowed the earnings from local companies in Australia. Consumer price index increased 0.5% in December and leading index of the economy increased 7.6% in November. Woolworths Ltd sales increase slowed to 4.1% rise.[/R]

The benchmark stock index plummeted 1.6% in Australia as investors fretted that rising consumer prices will lead to a rate hike when the RBA meets on February 2.

Concern over the imminent new banking industry regulatory measures by the U.S. President Obama administration also continues to linger.

In Sydney trading ASX 200 Index fell 1.6% or 73.3 to 4,644.60.

Of the ASX 200 index stocks, 30 gained, 162 fell, and 8 were unchanged. GPT Group led gainers in the index shares with a rise of 3.6% followed by GUD Holdings increasing 2.1%.

The Australian dollar advanced 0.3% to 90.94 U.S. cents.

Consumer Prices Rise 0.5% in December

Australian Bureau of Statistics reported today that the country’s Consumer Price Index increased 0.5% in the three months to December from a 1% rise in the previous quarter.

Prices also advanced 2.1% through the year to December.

Consumer prices were driven by fruit 15.9%, domestic holiday travel and accommodation6.6%, house purchase 1.0%, rents 1.0% and beer 2.1%.

However, gains were pared by automotive fuel 2.8%, audio, visual and computing equipment 7.1% and pharmaceuticals 5.3%.

Australia Leading Index Rises 7.6% in Nov

Westpac and Melbourne Institute Leading Index, which measures economic prospects in the next three to nine months, jumped 7.6% in November from 5.8% the previous month.

The coincident index, which gauges current economic activity, rose by an annualized 0.5% in November from a month earlier.

A coincident index, which is a broad measure of current economic activity, grew at an annualized 0.5% in November, compared with a flat result in October.

Westpac economist Bill Evans notes that the growth from a 3.2% contraction represents the fastest growth since the mid 1970s.

The report notes that Reserve Bank of Australia is likely to raise its key rate by 0.25% on February 2.

Over the last six months, growth in the index has moved from a contraction of 3.2% in June to the current 7.6% growth.

“The evidence from the leading index, the Westpac Melbourne Institute Index of Consumer Sentiment, the labor market, and recent trends in retail sales indicates that the bank will be keen to move monetary settings back to a level where interest rates are no longer stimulatory for the economy,"" said Evans.

Macarthur Coal Sales Rise 18% to 1.45 million tons

Macarthur Coal reported that its second quarter coal sales climbed 18% to 1.45 million tons on resurgent demand.

Of the total sales increase, 89% were of the pulverized coal, while sales to traditional customers increased 74%.

The company forecasts that third quarter sales will drop on low opening stocks, the ongoing infrastructure congestion and the likely effects of wet weather.

Woolworths Ltd. Q2 Sales Growth Slows

Woolworths Ltd sales in the three months ended Jan 3 rose 4% to A$13.8 billion from A$13.3 billion in the same period a year ago. Sales increase was lower than estimated by analysts of A$14 billion.

Revenues in the merchandise division plummeted as second quarter Big W sales dropped 0.3% to A$1.4 billion from a rise of 9.5% a year ago.

Australian supermarket sales advanced 5.9% to A$9.1 billion in the period, while revenue from domestic grocery outlets jumped 3.8%.

In addition sales in New Zealand supermarkets climbed 4.1% to NZ$1.4 billion.

Chief executive officer Michael Luscombe said that annual profit will rise between 8% and 11%.

ASX Movers

Energy World Corporation Limited led the decliners in the S&P ASX 200 index with a loss of 9.3% followed by losses in Kagara Ltd of 8.1%, in Aquila Resources Limited of 7.5%, in Minara Resources Limited 7.4% and in Sundance Resources Limited 6.6%.

GPT Group led gainers in the S&P ASX 200 index with a rise of 3.6% followed by gains in GUD Holdings Limited 2.0%, in Biota Holdings Limited of 1.9% and in Flight Centre Limited of 1.8%.

Other Movers

BHP Billiton plc dropped 2.3% to A$40.30 and the company said it will fund the expansion of a mine that it operates in a partnership with Blackthorn Resources at the Mumbwa Iron Oxide Copper Gold project in Zambia.

CSR Limited declined 2.3% to A$1.87 after the building products maker rejected a A$1.4 billion offer from China''s Bright Food Group for its 150 year-old sugar business, and said it would go ahead with a planned demerger of the business, to be called Sucrogen.

Paladin Energy Ltd the mining company decreased 4.3% to A$3.71.

Rio Tinto Limited the mining company decreased 4.6% to A$69.90.

Westpac Banking Corporation slipped 2.3% to A$24.33.

Woolworths Limited fell 2.4% to A$26.80 after the retailer said second quarter sales rose 4.1% from a year ago, a marked slowdown from a year ago when spending was boosted by the government''s stimulus package.