Australia Market Report of September 10: Rising Figures to Delay Rate Cut

The Australian share market fell yesterday. The benchmark S&P/ASX200 index was down 87.4 points, or 1.75%, to 4980.1, while the broader All Ordinaries gave up 84.4 points, or 1.67%, to 5041.9. The resource stocks dropped again, with the commodity prices down.

Wall Street was down 2.5% overnight as shares of investment bank Lehman Brothers plunged more than 40% on fears it was struggling to raise capital.

Oil fell as a result of the share market tumble, and gold, silver and copper were all lower. Australia market will face drops in financial and resource stocks today.

At 06.41am, the Sydney Futures Exchange's September Share Price Index contract was down 161 points, or 3.21% to 4849.

The Australian dollar opened weaker today after risk aversion and a stronger US dollar. At 0700 AEST, the Australian dollar was trading at $US0.8021/25, down sharply from yesterday's close of $US0.8112/16. A 0741 AEST, the dollar dropped to an even $US0.80.

Overnight crude oil for October delivery fell $US3.17 to settle at $US103.17 a barrel on the New York Mercantile Exchange - was another negative for the local currency.

Key Economic Facts and Figures

National Australia Bank's (NAB) monthly business survey found business conditions rose two index points to minus three points in August. It was a rebound from the July fall in business conditions to the lowest level since October 2001, in the survey of more than 400 private sector firms. The August reading is 23 points lower than its most recent peak in October 2007. The measure of employment rose eight index points to two points after the previous two months reported negative results. Wages rose by 1.1 per cent in August on a three-month, seasonally adjusted basis, the report said.

Australian retail trade increased by 0.1 per cent in July in trend terms to A$18.232 billion from a downwardly revised A$18.206 billion in June, according to figures from the Australian Bureau of Statistics. The trend estimate rose 3.1 per cent over the year. A strong rise in retail trade in July will probably delay a rate fall until November instead of next month. The trend in retail sales is soft and the annual rate is lower than inflation.

The Australian Bureau of Statistics releases lending finance data for July. The Westpac/Melbourne Institute index of consumer sentiment also will be released.

M&A News

BG Group (ASX:BG) has conceded defeat in its pursuit of Origin Energy (ASX:ORG), after the target formed a A$9.6 billion joint venture with US-based ConocoPhillips (NYSE:COP) to commercialise its coal seam gas resources. Yesterday the UK-based company said it would not increase its A$13.8 billion bid, comprising A$15.50 cash per share, or extend the offer period for Australia's second largest power retailer.

Centro Properties (ASX:CNP) says the decision to withdraw its A$600 million Centro Bankstown shopping centre from sale will not have a negative effect on its recapitalisation program. Centro has until September 30 to convince its US lenders to extend their debt deadline to December 15, aligning it with that of the group's Australian banks. It is thought Centro is quietly confident it will get its extension.

Amcor (ASX:AMC) is expected to bid for a number of packaging businesses being offloaded by Rio Tinto (ASX:RIO). Analysts have estimated the value of the packaging assets at more than A$6.2 billion and Amcor is unlikely to bid for the entire division.

Anglo American (NASDAQ:AAUK) will acquire 13.47 million shares in Magma Metals (ASX:MMB) at A60c each for a total consideration of A$8.08 million. Following this transaction Anglo will hold a 12 per cent interest in Magma and will nominate one non-executive director to Magma's board.

Important Corporate News

ANZ (ASX:ANZ) will overhaul its corporate structure and reduce middle management layers to advance its strategy to become a super regional bank. ANZ could cut up to 500 jobs as part of a cost-cutting program.

Ivanhoe Australia (ASX:IVA), 83% owned by Ivanhoe Mines (TSE:IVN) of Canada, will develop three new copper mines in eastern Australia over the next five years, Chief Executive Peter Reeve said. The properties covering 2,250 square kilometres in eastern Australia's Cloncurry region were undergoing studies to gauge the mines' economic feasibility.

Michelle Liang
Asia Busines News Asia Bureau
TEL: +61-2-9247-4344


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