Aussie stocks have closed lower this afternoon after investors reacted to the Reserve Bank of Australia’s decision to raise interest rates for the sixth time in eight months.
The local market started the day strong, but trading tapered off throughout the session as the impact of the federal government’s new mining tax continued to sink in, with resource stocks taking a battering for the second day.
The S&P/ASX 200 Index closed the day 48 points lower at 4,737. While on the futures market, the SPI200’s down 51.
In economic news: The RBA has increased the official cash rate by 25 basis points to 4.5%, but has hinted that it may now take a breather to let borrowers adjust to higher mortgage rates. Governor Glenn Stevens cited increasing demand from the mining industry as part of the reason behind the decision.
To company news around this afternoon: Commonwealth Bank of Australia Ltd (ASX:CBA) is the first of the big four banks to pass on the latest interest rate rise to borrowers. Shortly after the RBA’s decision this afternoon, the bank followed suit in raising its variable loan rate by 25 basis points to 7.36%. For homeowners on variable lending rates, the increase will add about $46 to the average monthly payment for a typical 25-year, $300,000 home loan. Meanwhile, ANZ Bank is reviewing its interest rates following the RBA’s decision, but says it is reluctant to increase rates by any more than 0.25%. Shares in the Commonwealth Bank closed 1.05% weaker at $58.31.
The federal government’s proposed new resources tax has claimed its first casualty with iron ore miner Cape Lambert Resources Ltd (ASX:CFE) announcing it will scrap planned exploration in Australia. The company had planned to develop a mine in Western Australia’s Pilbara region, but has chosen to abandon the project following news of the 40% mining tax. The project could have been similar in size to one the company sold to China Metallurgical Group for $400 million almost two years ago. Cape Lambert says its overseas prospects, including an iron ore project in Sierra Leone in West Africa and a gold project in Greece, are now more attractive than its Australian projects. It is the first mining company to cancel work in Australia due to the tax, which applies from 2012. Cape Lambert Resources shares closed 5.62% lower at $0.42.
Also making news: Qantas Airways Ltd (ASX:QAN) will be forced to repay tens of millions of dollars in disputed commission fees to travel agents after the Federal Court today ruled the fuel surcharge the company charges passengers is not a tax, but simply part of the fare.
Toro Energy Ltd (ASX:TOE) says it will not exercise its option to acquire the Napperby uranium project in the Northern Territory from fellow uranium explorer Deep Yellow because it is not economically viable.
Aussie gold miners Newcrest Mining Ltd (ASX:NCM) and Lihir Gold Ltd (ASX:LGL) have entered into a $9.5 billion merger implementation agreement.
And shopping centre owner Westfield Group Ltd (ASX:WDC) says it expects to commence around $1 billion of development projects in 2010 due to the improving environment.
In the best and worst performers: The best performing sector at close today was the Health Care index, up 98 points at 8,566. One of the sectors with the biggest losses was the Materials index; down 282 points at 11,703.
The best performing stock in the S&P/ ASX200 was Hills Industries, shares rose 3.7% to $2.52, while shares in Lihir Gold and Oil Search also closed higher.
The worst performing stock was Eastern Star Gas, shares fell 13.89% to $0.775. Shares in Linc Energy and Sundance Resources also closed weaker today.
In commodities, gold is trading at $1,179.50 U.S an ounce and light crude is down $0.37 to $85.82 U.S a barrel.
