Australia Market Report of August 8: Buying Opportunity Coming

Sydney, Aug 8, 2008 AEST (ABN Newswire) - Wall Street tumbled Thursday as further troubles in the financial sector and higher unemployment raised fresh concerns about the economy. But analysts said the Australian share market would soon become a buying opportunity.

Oil overnight ended a three-day losing streak to close above $US120, as fears of supply disruptions momentarily offset demand concerns. It rebounded modestly from recent falls on news that a pipeline carrying crude from Central Asia to the West would remain shut for about 15 days after a recent explosion.
The Australian dollar has continued its slide. At 7am AEST, the dollar was trading at $US0.9065/67, down from yesterday's close of 0.9120/23.

The Australian share market closed marginally firmer yesterday, as the banking sector gained with most of the big banks ending stronger. The benchmark S&P/ASX200 index was up 14.2 points, or 0.29% to 4983.3, while the broader All Ordinaries climbed 11.9 points, or 0.24% to 5030.

At 6.36am, the September share price index futures contract on the Sydney Futures exchange was 56 points down at 4919.

Key Economic Facts and Figures

Experts say that the commodities boom is over while the super-high prices that commodities have attracted in the past five years are falling and are unlikely to return to peak levels for the foreseeable future. Slowing demand in China and the slump global economy has seen the price of many base metals fall - some to three-year lows. It warned that oil will slide back towards its "marginal production cost" of US$60 to $80 a barrel.

The latest Australian Bureau of Statistics jobs data shows Australian businesses continue to hire more employees in spite of slowing economic growth. But economists said that jobs data is a lagging indicator - often four to six months behind the broader economic data - and is unlikely to have too much impact on the Reserve Bank's future interest rate decisions. The ABS data showed full-time jobs jumped by 53,700 last month, but this was offset by a 42,800 decline in part-time employment. July's jobless rate was 4.3 per cent, seasonally adjusted, for the fourth consecutive month, while the participation rate held at 65.3 per cent.

M&A News

Tower Australia Group (ASX:TAL) is taking on a new cornerstone shareholder, with investor Guinness Peat Group selling its 29.7 per cent stake in the insurer to Japan's Dai-ichi Mutual Life Insurance Company. The stake will be sold at A$3.75 per share. Dai-ichi will acquire 14.9 per cent first up.

Allco HIT (ASX:AHI) is proposed to sale of its New Zealand property finance business which flagged a restructure and suspended redemptions yesterday. Allco HIT has been holding talks on the possible sale of Strategic Investment Group, the parent of Strategic Finance, to a consortium since June.

Italian dairy group Parmalat (ZOBEX:P41) said it had dropped out of talks on a joint bid for Dairy Farmers, effectively ending its ambitions to buy the Australian dairy producer. Parmalat said in a statement "no mutually satisfactory resolution on terms and conditions" had been reached with Australian farmers' co-operative Murray Goulburn on a consortium that would have bid for Dairy Farmers.

Important Corporate News

Western Australia's Minara Resources (ASX:MRE) has been severely hit by the nickel price -- which has hit two-year lows -- and rising costs, leading it to deliver a 2008 first-half net profit of A$49.2 million, from A$246.5 million last year. The miner produced 15,000 tonnes of nickel in the period, despite the obstacles. Cash costs at Minara climbed 6.3 per cent to $US5.24 per pound of nickel for the half.

Westpac (ASX:WBC) chief economist Bill Evans said a decisive 50 basis point cut next month was an "attractive option" given the pace of the slowdown. The crumbling Australian dollar and faltering economy has prompted the bank to join the growing list of financial groups forecasting a 50 basis point cut in official interest rates next month.