Sydney Index Down 2.3%; Harvey Norman Sales Up

Darlington Musarurwa
05 Feb, 2010
New York City

Australian economy is expected to grow between 3.2% and 3.5% in the years 2010 and 2011 according to an estimate by the Reserve Bank of Australia. The building industry showed an expansion in January. Weak commodities dragged miners in Sydney trading.

[R]3:00 AM New York, 7:00 PM Sydney - Australian economy is expected to grow between 3.2% and 3.5% in the years 2010 and 2011 according to an estimate by the Reserve Bank of Australia. The building industry showed an expansion in January. Weak commodities dragged miners in Sydney trading.[/R]

Australian stocks fell markedly as investors sold off commodity and financial stocks on weaker global cues. International prices of gold, copper and tin dropped sharply in New York and London.

Gold prices decreased 4.5% to $1,064 per ounce, but crude oil prices edged up 0.4% to $73.4 a barrel.

BHP Billiton dropped 3.5%, Rio Tinto Group plunged 5% and Woodside Petroleum fell 4.1%.

Treasury secretary Wayne Swan also cautioned that economic growth is still fragile.

In Sydney trading ASX 200 Index fell 2.3% or 107.3 to 4,514.30. The benchmark index has declined 7.3% in the year after rising 31% in 2009 on the worries that China will tighten monetary policy and the prospect of global economic recovery in 2010 are fading.

Of the ASX 200 index stocks, 24 gained, 170 dropped, and 6 were unchanged. Resmed Inc led advancers in the index shares with a rise of 5.8% followed by Commonwealth Properties jumping 2.7%.

The Australian dollar increased 0.2% to 86.61 U.S. cents.

Australian Economy to Grow 3.2% to 3.5%

Reserve Bank of Australia reported in its statement of monetary policy that its central forecast is for the economy to expand between 3.2% and 3.5% in the years 2010 and 2011.

Private demand is also expected to strengthen through 2010.

However, the appreciation of the Australian dollar “will restrain activity in a number of industries that are exposed to international competition.”

Underlying inflation is projected to reach near 2.5% in the second half of 2010, before rising a little thereafter.

According to the report, by late 2010, consumer price index and underlying inflation are expected to be running at similar rates.

The RBA noted that if economic conditions gradually strengthen as expected monetary policy is expected to be adjusted “further over time to ensure that inflation remains consistent with the target over the medium term.”

Building Industry Index Up

Australian Industry Group/Housing Industry Association Performance of Construction Index gained 8.4 points to 57.7 in January.

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

The house building sub-index grew 10.3 points to 63.7.

Housing Industry Association Senior Economist, Ben Phillips, said, “Higher interest rates and continued structural barriers to new housing will be the main threat to the housing recovery.”

Harvey Norman Sales Rise 6.8%

Harvey Norman Holdings reported today that second quarter sales advanced 6.8% from a year earlier, while on a like-for-like basis sales jumped 6.5%.

The retailer forecasts pre-tax profit will rise by more than 40% in the first half ended December 31 on a sales growth of 4% to A$ $3.27 billion.

ASX Movers

PanAust Limited led the decliners in the S&P ASX 200 index with a loss of 9.2% followed by losses in St Barbara Limited of 8.0%, in Mount Gibson Iron Limited of 7.8%, in Sundance Resources Limited 7.6% and in Murchison Metals Limited 7.5%.

ResMed Inc led gainers in the S&P ASX 200 index with a rise of 5.8% followed by gains in Commonwealth Property Office Fund 2.7%, in Transfield Services Limited of 2.1% and in Australian Agricultural Company Limited of 1.9%.

Other Movers

Australia and New Zealand Banking Group Limited 2.4% to A$20.90.

BHP Billiton plc decreased 3.5% to A$39.55 after the Western Australia Premier Colin Barnett has given the company and Rio Tinto a July 1 deadline to begin paying at least A$300 million a year more in ore royalties, as part of negotiations to approve key elements of their proposed A$150 billion Pilbara venture, according to a report published by WA Business News.

Fortescue Metals Group Ltd the iron-ore exporter slipped 5.4% to A$4.51.

Harvey Norman Holdings Limited fell 2.6% to A$3.62 after the electrical retailer says it remains ""cautiously optimistic"" about the second half of fiscal 2010, having posted a 6.5% rise in like-for-like sales at its Australian operations in the second quarter.

Macquarie Group Limited dropped 5.6% to A$50.23 after the investment bank has agreed to take over the equity research, sales and trading assets of wealth manager Sal. Oppenheim and expand its presence in Europe.

Newcrest Mining Limited fell 2.5% to A$31.15.

Rio Tinto Limited dropped 5.0% to A$66.60.

Sims Metal Management Limited dropped 2.9% to A$20.75 after the metals recycling company stock was downgraded to “underperform” from “neutral” at Credit Suisse.

Woodside Petroleum Ltd declined 3.8% to A$41.52 after the oil and gas producer that representatives from three unions will meet with the company to discuss housing arrangements at its Pluto liquefied natural gas project in Western Australia state, according to Dow Jones report.