Commodities Take Hit But Stocks Index Climbs
The Age
Saturday May 3, 2008
PLUNGING commodity prices led Victorian companies to a weekly decline, while the S&P/ASX 200 Index reached a two-month high.
The Deloitte Victorian Index, which boasts BHP Billiton and Rio Tinto, fell 0.4% during the week, while the S&P/ASX 200 had a weekly gain of 2% - a little less than yesterday's 2.1% rise of 114.6 points, to 5700.4 points."The Vic Index underperformed the broader market . . . due to declines in mining companies as traders sold down commodity prices in the wake of another US (interest) rate cut by the Federal Reserve," said Deloitte partner Grant Hyde.Markets were flat straight after this week's quarter-percentage-point rate cut, which left the benchmark US interest rate at 2%.But a delayed rush of optimism in the US, which sent the Dow Jones Industrial Average up 1.5% and the S&P 500 up 1.8%, seemed to offset falling commodities, which in turn were responding to the stronger US dollar.The price of six metals included in the London Metal Exchange Index dropped more than 4.5% over three days, oil is slightly lower at $US112.52 a barrel and gold fell to a near four-month low, around $US850 an ounce.Gold's spectacular rise since the start of the year has been almost wiped out: the price of the precious metal is only 2.1% above where it stood on December 31.Wheat has actually declined in value over the period but silver has performed somewhat better, having risen 9.3% (see graph).Yesterday only 33 companies included in the S&P/ASX 200 Index fell, but Newcrest Mining lost $1.39 to $27.60 and Lihir Gold dipped 10? to $2.98.Not surprisingly, the world's biggest miner, BHP, lost 3.5% over the week, although it closed 52? higher yesterday at $43.42.Rio Tinto also sank during the week, down 5.9% - and yesterday's $2.26 gain to $138.26 was not enough to restore it to the level of BHP's takeover offer. Rio Tinto's share price would have to reach $147.63 a share to equal BHP's offer ratio of 3.4 shares for every Rio Tinto share.But investors showed renewed enthusiasm for financials, shoving Macquarie Group $4, or 6.5%, higher to $65.49. ANZ had a win in the Federal Court, with a ruling that the securities lending agreements offered by collapsed broker Opes Prime gave it ownership of millions of shares. Like Westpac and National Australia Bank, ANZ was up about 5%.Shares in the Bendigo and Adelaide Bank, which yesterday announced it would increase its standard variable lending rate by 10 basis points, were up 71? to $12.78. Last night the bank's website said a variable home loan with no monthly fee would have an annual interest rate of 9.55%.Improved retail sales figures, which were up 0.5% in March particularly on higher food sales, helped JB Hi-Fi rise 69?, or 7.7%, to $9.69. Woolworths added 73? to $28.95.But, speaking at Mercer's Asia Pacific Investment Forum in Melbourne yesterday, Mercer principal Patricia Pascuzzo noted that the world's sovereign wealth funds were underinvested in equities as an asset class.They were choosing higher-risk, longer-term investments and, because they had "patient capital", were more willing to try alternative investment strategies, she said.More than two-thirds of the assets in the hands of sovereign wealth funds worldwide are held by those in the Middle East, while one-third are held by Asian sovereign wealth funds, including Australia's Future Fund.? To listen to Grant Hyde's assessment of Victorian companies this week, go to www.theage.com.au/businessday
© 2008 The Age