Stocks defy US fall

Published in The Herald Sun, July 2007 by Stephen McMahon

The share market at noon was weaker but did not match the big falls on United States markets on Friday.

The big banks weighed upon the bourse, but main miners BHP Billiton and Rio Tinto were stronger.

Aequs Securities institutional dealer Ric Klusman said that, although the Australian market had fallen this morning, it was holding up fairly well as plenty of cashed-up investors were looking for bargains.

"Everyone's looking for buying opportinities," Mr Klusman said.

"We're seeing good institutional support."

Mr Klusman said the market largely had ignored the US drop because the local bourse had already suffered large falls last week.

The resources sector was being helped by the higher oil price and a falling dollar.

At 1200 AEST, the benchmark S&P/ASX200 index was down 1.7 points at 6081.2 while the All Ordinaries dipped 6.8 points to 6120.5.

On the Sydney Futures Exchange, the September share price index contract was off eight points to 6,057 on a volume of 21,370 contracts.

At 1205 AEST, BHP Billiton was up 56 cents at $36.53, and Rio Tinto had added $1.10 to $91.70.

Oil and gas producer Woodside Petroleum was 24 cents lower at $42.77. Santos reversed 25 cents to $13.20 as it began investigating the cause of a leak in the Moonie-to-Brisbane pipeline.

As the profit-reporting season started to kick into gear, real estate developer Australand Property Group slipped three cents to $2.27 despite a 34 per cent lift in first half profit to $119.596 million.

On Wall Street on Friday, equities markets had some of the worst losses in five years amid concerns about tightening credit.

The Dow Jones industrial average fell 208.10 points, or 1.54 per cent, to 13,265.47 while the Standard & Poor's 500 Index dropped 23.71 points, or 1.60 per cent, to 1,458.95.

The Nasdaq Composite Index lost 37.10 points, or 1.43 per cent, to 2,562.24.

At 1213 AEST, of the main banks, the National had retreated 22 cents to $37.98, Westpac was down 17 cents to $25.54, the Commonwealth Bank was 36 cents lower to $54.21, and the ANZ was 10 cents down at $28.07.

Retailer Coles Group was down nine cents at $14.20, while Woolworths strenthened 66 cents to $26.90.

Telstra nudged up one cent to $4.58, while Optus-owner Singapore Telecommunications had risen nine cents at $2.66.

In the media sector, News Corp was nine cents higher at $26.49, and its non-voting scrip was up 10 cents to $24.71.

Publishing and Broadcasting was 17 cents richer at $18.43, and Fairfax was five cents poorer at $4.86.

Among gold stocks, Newcrest had backtracked 28 cents to $24.47, Newmont was six cents firmer at $4.87, and Lihir was steady at $3.02.

The price of gold at 1224 AEST was $US660.70 per fine ounce, down $US3.30 on Friday's close.

At 1227 AEST, among other stocks, Valad Property Group had shed two cents to $1.83 as it moved to buy a group of retail depots and packaging plants operated by Carter Holt Harvey Ltd in New Zealand for $277.3 million.

New Zealand's national carrier, Air New Zealand, lifted nine cents to $2.33 after it said it was carrying a passenger load of nearly 80 per cent in June and won a five-year contract to maintain Boeing 767s for Hawaiian Airlines.

At 1232 AEST, the top-traded stock by volume was health services provider IM Medical, with 84.3 million shares worth $3.67 million changing hands. IM Medical was up 0.4 cents at 4.3 cents.

National turnover at 1234 AEST was 996.23 million shares worth $3.03 billion, with 821 stocks down, 368 up and 308 unchanged.

Period of pain

Last week, the benchmark ASX 200 index had its biggest fall in 15 years losing more than 300 points or 5.3 per cent -- wiping off $83 billion.

Wealth Within analyst Dale Gillham said the market could fall to as low as 5900 points in the next few weeks before rallying.

"The falls in recent days does not necessarily constitute an end to the bull market," Mr Gillham said.

Most economist and analysts expect this period of pain will continue for the short term but the market will bounce back and finish the year above its recent record level of 6400 points.

This week, investors will be closely monitoring US economic data on jobs, inflation and manufacturing for signs of further weakening.

In Australia, all eyes will be on retail trade figures, private sector credit and building approvals for anything that may impact on the Reserve Bank of Australia's upcoming decision on interest rates.

After the downturn in global stock markets, market betting on the RBA lifting rates on August 8 to 6.5 per cent fell back slightly from an almost 80 per cent chance to a 72 per cent possibility on the Sydney Futures Exchange.

CommSec chief equities economist Craig James said the interest rate was "not assured but it is highly likely" because of the buoyant economic times.

"While inflation is at the bottom of the target band, the RBA is likely to be less certain that it will stay there, especially with retailers dragging the chain in passing through the savings of the strong Australian dollar to consumers," he said.

This week's start of the profit season is expected to help bolster the stock market.

But analysts warn that any upturn may not happen until the bulk of companies report in the last two weeks of August.

AMP Capital's chief economist Shane Oliver expects another good profit reporting season with profits slowing from last year's 21 per cent pace, but still strong at around 15 per cent.

"Resources sector profits will remain the standout with growth of around 25 per cent, but the key focus will be on the industrials - excluding financials - where we expect profit growth to pick up to around 11 per cent after just 3 per cent a year ago, thanks to stronger domestic conditions," he said.

"The strong Australian dollar will be the key drag for industrials."

Late last week, global investors unwinding their more risky positions pushed down the Australian dollar from its high point of US88.71 to close the week at US85.18.

Westpac global head of economics Bill Evans said despite the stock market "correction", the sharp pick-up in inflation and increasing likelihood the interest rate differential with the US is about to widen will push the Aussie to US92 by the end of the year.

"We envisage that the peak in the Australian dollar will hold from the end of 2007 well into 2008," Mr Evans said. "Our estimate for mid-2008 is US93c."

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