Australia Market Report of August 5: Interest Rate Expected Unchanged

Sydney, Aug 5, 2008 AEST (ABN Newswire) - The US equities fell on worries about accelerating inflation and the Wall Street banks' losses from the US housing slump. Crude oil prices plunged briefly below $US119 a barrel overnight for the first time in three months. It is largely pushed down by the US government survey that revealed consumer spending had cooled in June and inflationary pressures accelerated.

Yesterday the Australian share market closed weaker on lower base metal prices and a profit downgrade by Lend Lease Corporation. The benchmark S&P/ASX200 index had fallen 16.3 points, or 0.33%, to 4887.7, while the broader All Ordinaries index lost 20.4 points, or 0.41%, to 4957.6.

The Australian dollar slumped to a three-month low yesterday. In early trading this morning the dollar fell to US92.86c, its lowest level since May amid mounting anticipation that the Reserve Bank will signal a cut on interest rates after it meets today. Reserve Bank is unlikely to change the official interest rate which is now at 7.25%, but markets will look for the signs of bias towards cuts. Figures released yesterday produced further evidence the economy is slowing.

Resource stocks may slip after commodities including oil and gold declined overnight. At 0735 AEST on the Sydney Futures exchange, the September share price index futures contract was 44 points lower at 4,817.

Key Economic Facts and Figures

Major city house prices have declined by the sharpest rate in more than three years, inflicting further pain on home owners faced with 12-year high interest rates. The Australian Bureau of Statistics house price index - which calculates the average for the country's eight major cities - fell 0.3 per cent in the June quarter. The RBA holds its monthly board meeting today, and announces its decision on interest rates following the meeting, but economists expect it to keep its key cash rate unchanged for a fifth straight month.

Job advertisements fell for a third successive month, according to the ANZ bank (ASX:ANZ). The survey by ANZ revealed the newspaper and internet job ads in July declined 0.3 percent on the previous month and 5.5 percent since last November.

Official labour force data is released on Thursday.

The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index for July is due.

M&A News

OZ Minerals (ASX:OZL), the world's second- largest zinc mining company, says Chinese companies may be interested in investing in the company following the recent decline in its share price. OZ Minerals, created by Oxiana's (ASX:OXR) acquisition of Zinifex, produces zinc, copper, gold and nickel from mines in Australia and Laos. The stock has declined 12% since July 23.

The Australian port and rail operator Asciano (ASX:AIO) on Monday rejected the bid from private equity Group TPG Capital and independent investment fund Global Infrastructure Partners (GIP), worth around 2.9 billion Australian dollars, saying the offer undervalued its business. Asciano shares rose as much as 19 percent on news of the bid. Asciano runs a national rail operation and a ports and stevedoring business, Patrick, at Australia's four major ports.

Babcock & Brown Infrastructure (ASX:BBI) is looking to sell up to half of local lines company Powerco by as early as the end of next month. Cheung Kong Infrastructure (HKG:1038) has already been in discussions with BBI about Powerco but that the Hong Kong company wants to buy all of Powerco and combine it with its newly acquired Wellington network.

Important Corporate News

Insurer and fund manager Axa Asia Pacific Holdings (ASX:AXA) said half-year profit fell 75% on declines in global and domestic equity markets. Profit after tax for the six months to June 30 slumped to A$94.2 million from A$374 million in the corresponding period the year before.

The Seven Network (ASX:SEV) has posted a fall in bottom line annual profit. Net profit for the year ended June 28 was A$141.59 million, down 91.3 per cent on the previous corresponding year. Seven also confirmed it will buy back up to 40 million shares or about 19.4 per cent of its issued shares in the year from September 10.