Australian Stocks Fall Ahead of Rate Decision

Darlington Musarurwa
01 Feb, 2010
New York City

Australian investors took a cautious view ahead of the RBA meeting and rates are expected to increase by 25 basis points to 4%. Australia

[R]3:00 AM New York, 7:00 PM Sydney – Australian investors took a cautious view ahead of the RBA meeting and rates are expected to increase by 25 basis points to 4%. Australia’s home prices rise 5.2% in December and private read on inflation shows an increase of 0.8% in January. Xstrata considers A$6 billion expansion.[/R]

Australia stock indexes dropped 1% as investors speculate that the Reserve Bank of Australia may lift its key interest rate after a private report showed that consumer prices gained in January.

The rate meeting is scheduled tomorrow and investors are expecting interest rate to increase 25 basis points to 4%. Strong employment data and persistent demand for commodities from China and other Asian nations has sustained the economy. Employers added 135,700 jobs in three months to December 2009.

Commodity stocks also led the market lower as gold prices fell 0.2% to $1,083 per ounce and crude oil prices decreased 0.3% to $72.70 a barrel.

Aristocrat Leisure estimated its annual operating profit of A$116 million, significantly higher than analysts’ estimate of A$99 million.

In Sydney trading ASX 200 Index declined 1% or 45.5 to 4,524.10.

Of the ASX 200 index stocks, 46 gained, 148 fell, and 6 were unchanged. Charter Hall Group led gainers in the index shares with a rise of 11.4% followed by Aristocrat Leisure soaring 11.1%.

The Australian dollar fell 0.03% to 88.32 U.S. cents.

Australia Property Prices Rise 5.2%

Australia Bureau of Statistics reported today that the country’s price index for established houses for the weighted average of the eight capital cities increased 5.2% in the last quarter ending in December 2009.

Property prices in Melbourne increased 6.8%, in Sydney 5.0%, in Perth 5.7%, in Brisbane 3.8%, in Adelaide 2.1%, in Canberra 3.6%, in Hobart 4.3% and in Darwin 4.9%.

The ABS also noted that the movement in the preliminary established house price index between June quarter 2009 and September quarter 2009 has been revised from an increase of 4.2% to 4.4%.

Over the year to December, the price index for established houses for the weighted average of the eight capital cities surged 13.6%.

Australia’s Inflation Rise 0.8% in January

TD Securities Ltd and the Melbourne Institute inflation gauge showed consumer prices edged up 0.8% in January from 0.3% in December and increased 2.6% from a year ago month.

According to the report, consumer prices were mainly driven by higher costs of holidays, travel, accommodation, utilities and education.

However, prices for fruit and vegetables dropped.

TD Securities forecasts that the Reserve Bank of Australia will raise interest rate when it meets tomorrow.

Xstrata Coal Expansion of A$6 billion

The Australian reported today that Xstrata is considering building 100 million tons a year thermal coal operation in Queensland at an estimated cost of A$6 billion. A report in the Australian noted that the total development cost may reach A$15 billion.

Under the plan, production at Wandoan, 400km northwest of Brisbane will increase fivefold from the current 22 million tons a year in the next 10 to 20 years.

According to an interview of James Rickards, a spokesman for Xstrata with Bloomberg, the project is likely to produce 30 million tons of coal a year by 2014.

The report notes that Xstrata Coal''s chief development officer, Jeff Gerard, said Wandoan was expected to expand in four stages and could be producing 100 million tons a year in a decade from now.

Xstrata controls 75% of the project and Japan based Itochu Corp and Sumitomo Corp control 12.5% each.

ASX Movers

Energy World Corporation Limited led the decliners in the S&P ASX 200 index with a loss of 11.4% followed by losses in Platinum Australia Limited of 11.3%, in Extract Resources Limited of 10.8%, in Linc Energy Ltd 10.0% and in Kagara Ltd 9.7%.

Charter Hall Group led gainers in the S&P ASX 200 index with a rise of 11.3% followed by gains in Aristocrat Leisure Limited 11.0%, in Transfield Services Limited of 4.1% and in Ramsay Health Care Limited of 3.7%.

Other Movers

Aristocrat Leisure Limited surged 11.0% to A$4.41 after the maker of slot machines said on Monday its full-year operating profit would beat analysts'' forecast by about 17%.

Extract Resources Limited the uranium explorer plunged 10.8% to A$7.04.

Lihir Gold Limited declined 2.1% to A$2.71 after the gold miner reported production of 1.12 million ounces of gold at a total cash cost of $397 per ounce in 2009 up 27% from the previous year.

Newcrest Mining Limited the gold producer decreased 1.8% to A$30.95.

Platinum Australia Limited plunged 11.3% to A$0.90 after the owner of mines in South Africa and Australia was downgraded to “hold” from “buy” at Paterson Securities.

Ramsay Health Care Limited the private hospital operator increased 3.7% to A$11.90.

Santos Limited the oil and gas producer fell 2.9% to A$12.79.

Ten Network Holdings Limited rose 2.6% to A$1.58 after the broadcaster was upgraded to “neutral” from “underperform” by Credit Suisse Group AG.

Woodside Petroleum Ltd dropped 1.7% to A$41.59 on weak international energy prices.