Banks Tank But Resource Stocks Put Their Energy Into The Market

The Age

Tuesday June 3, 2008

Vanessa Burrow

IN WHAT has become a familiar tug-of-war, resource companies are supporting the sharemarket while financial stocks drag it down. Yesterday, resources won, pulling the S&P/ASX 200 Index from the red, and leaving it just 7.6 points higher at 5662.3 points.

But sobering economic data acted to douse any enthusiasm. Austock senior client adviser Michael Heffernan said poor retail sales figures had added to the negativity surrounding banks. Retail sales fell 0.2% in April, offering a weaker-than-expected view of the Australian economy. "This just confirms the downturn and banks are in the front line in a downturn," Mr Heffernan said.

ANZ lost 78? to $20.90, National Australia Bank fell 88? to $30.48, Westpac was down 58? to $22.67 and St George, which traded without the right to an 88? interim dividend, plunged $2.27, or 6.6%, to $31.95.

It was the lowest shares have fallen since Westpac announced its offer for St George last month. The dive coincided with Treasurer Wayne Swan's announcement that the Government would not consider lifting the "four pillars" policy, which prevents Australia's four major banks from merging.

However, Tolhurst strategist Tony Farnham said the two events probably were unrelated. "I would have thought, if anything, St George would have gone higher," he said.

"It's now reinforced the point that if you want to get a significant uplift in market share, St George is the only way to go."

Macquarie Bank, which yesterday said it would combine its Capital Securities and Equity Markets Group, fell $1.24 to $53.26. Platinum Asset Management was the worst performer among the larger stocks, losing 38?, or 8.3%, to $4.20.

Declining retail sales also affected the Australian dollar, which nosedived from a high of US95.6? to a low of US95.13?.

The market had already ruled out any possibility of an interest rate rise when the Reserve Bank board meets today.

But the dollar's reaction suggests the poorer-than-anticipated economic situation may temper the bank's pro-tightening stance on interest rates.

On the upside, BHP Billiton, which has filed for antitrust clearance for its attempted takeover of Rio Tinto from the European Commission in Brussels, jumped 4.6%, with shares gaining $1.99 to $45.49. Rio too, gained $3.70 to $141.70.

Fortescue Metals, which only recently pushed through the $10 a share mark, added 59? to $11.24.

Coal seam gas producer Arrow Energy jumped to a record $4.11 a share, and closed 13.8%, or 46? higher, at $3.79 (see historical graph below).

The company has signed an agreement with Royal Dutch Shell, which will make them co-owners of Arrow's Queensland projects.

Arrow Energy said the deal was worth up to $776 million, based on a payment of up to $644 million for a 30% stake in Arrow's Australian tenements and a payment of up to $132 million for a 10% stake in Arrow International.

Also buoyed by speculation surrounding iron ore negotiations, Sundance Resources added 9.5?, or 25.3%, to 47?. The company last week announced its Cameroon project may produce cash flows of more than $1 billion.

In energy, Woodside Petroleum gained 97? to $65.97 and Santos added 69? to $21.77, while the smaller MEO Australia added 13.5?, or 31.8%, to 56?.

theage.com.au

? For the latest exchange rates, go to markets.theage.com.au/apps/mkt/forex.ac

© 2008 The Age

Back to News Index | Back to Home