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Sydney, July 15, 2008 AEST (ABN Newswire) - Australian shares are set to open softer after fresh bank sector worries saw Wall Street end lower, though firmer resource stocks may lend support. Yesterday the Australian share market closed firmly in the red, with almost all sectors losing ground, dragged lower by continuing signs of weakness in the US economy. CMC Markets senior dealer Dominic Vaughan said the mining and property sectors were poor performers yesterday.
Fears about the banking sector and its exposure to mortgage losses were exacerbated after IndyMac was taken over by federal regulators at the weekend and following sustained falls in the share prices of two mortgage-financing giants, Fannie Mae and Freddie Mac.
Asian markets slipped into negative territory Monday as investors reacted to news that the U.S. government will rescue mortgage giants Fannie Mae and Freddie Mac. Japanese shares edged lower in the afternoon session, giving up earlier gains, while Australian and Singaporean stocks also declined in thin trading volumes as investors remained cautious.
The share market dropped 1.2% to a near two-year closing low on Monday, with National Australia Bank leading declines on worries about the impact of financial sector woes and high oil prices on economic growth.
Oil settled above $US145 a barrel for the third time this month, close to where it began on Monday, after a back-and-forth trading session that mimicked last week's wild swings.
The benchmark S&P/ASX200 index fell 58.9 points, or 1.18 per cent, to 4921, its lowest closing level since July 19, 2006, while the broader All Ordinaries Index fell 59.9 points, or 1.18 per cent, to 5007.9.
National Australia Bank Ltd has lifted its standard variable mortgage rates by 15 basis points. The bank's standard variable rate home loan will rise to 9.61 per cent from Tuesday (July 15).
Key Economic Facts and Figures
There are no official data for unsold homes in Australia but the Housing Industry Association (HIA) estimates that the industry is currently building around 40,000 fewer homes than are needed to meet population and migration levels. Indeed, the HIA estimates that 1 million new homes need to be built in Australia over the next five years.
The value of Australian personal finance commitments fell a seasonally-adjusted 7.8% to A$6.26 billion in May from April, according to data released by the Australian Bureau of Statistics Monday. The decrease in personal finance was due to a seasonally-adjusted 11.9% fall in fixed lending commitments and a seasonally-adjusted 4.5% fall in revolving credit commitments. The value of commercial finance commitments rose a seasonally-adjusted 3.2% to A$34.30 billion in May from A$33.24 billion in April, the ABS said.
AUSTRALIAN lending finance has posted its biggest annual fall in 16 years as slumping consumer sentiment wards off business borrowing. Total lending finance - which includes personal, housing, commercial and lease borrowing - slumped by a seasonally adjusted 13.3 per cent in the year to May, the Australian Bureau of Statistics said today. This was the largest annual decline since January 1992 when Australia was emerging from a recession.
Today, the Reserve Bank of Australia releases the minutes of its July 1 board meeting.
IPO and M&A News
QUEENSLAND coal king Ken Talbot will find out this week if he gets to pocket the cash from the sale of most of his stake in Macarthur Coal. The mining magnate was assumed to have exited the company he founded with huge amounts of cash in his pocket; his ``sales'' to ArcelorMittal and Posco a couple of weeks ago were worth $636 million.
Steel major TataSteel is looking at acquiring an iron ore mine in Western Australia to feed Anglo-Dutch steel maker Corus. TataSteel has expressed interest to invest in Western Australia's iron ore sector.
U.K. gas giant BG Group PLC plans to sell a majority stake in Contact Energy Ltd. if its hostile bid for Origin Energy Ltd. is successful. BG made a hostile bid of 13.8 billion Australian dollars (US$13.3 billion) after Origin's board rebuffed a friendly proposal to acquire the company. Origin, based in Sydney, owns 51.4% of Contact, a New Zealand energy generator and retailer.
Portman Mining has ruled out an immediate takeover bid for fellow iron ore explorer Golden West Resources, although it will persevere with its push for a seat on the board after building up a 19.9 percent stake. In April, Portman seized an opportunity created by the collapse of broker Opes Prime to buy an initial 10 percent holding.
Important Corporate News Today:
Centro Properties Group (ASX:CNP) has entered into an agreement to sell 29 of the 31 properties in the Centro America Fund ("CAF"), a wholesale fund managed by the Centro group, to a private real estate investment advisor. Centro's direct interest in CAF is 46.65%, excluding Centro's holding in the Centro Direct Property Funds.
Alchemy Resources Limited (ASX: ALY) announced that sampling of outcropping iron formations at the southern end of the recently acquired Three Rivers Gold Project in the highly prospective Robinson Range in WA's Gascoyne District has confirmed the presence of high grade hematite iron ore.
Allco Finance Group (ASX:AFG) has reached agreement with its banking syndicate on the terms of the new senior debt facility, subject to the documentation of those terms and the twelve syndicate banks obtaining their required internal approvals. The new senior debt facility will replace Allco's existing senior debt facilities and match the outstanding drawings at the time of financial close of the new facility. The new agreement runs to September 2009 and does not contain any market capitalisation review clauses.
