It was an eventful day for Australian investors with a mass of economic news to absorb, including the Reserve Bank of Australia’s rate cut. Weak offshore leads, weighed down by lingering concerns over Europe’s debt situation, pushed stocks lower at open. By afternoon a soft read on Chinese manufacturing accelerated losses, led by the miners faltering on demand concerns. By close the top 200 stocks had shed more than 1.5 per cent, with most sectors finishing in the red.
The S&P/ASX200 Index retreated 65 points to finish at 4,233. On the futures market the SPI is 53 points down.
Economic news
Interest rates
Australia’s central bank has cut the official cash rate for the first time in more than two years. As widely expected from economists, the Reserve Bank of Australia lowered interest rates by 25 basis points to 4.5 per cent.
Manufacturing data
Manufacturing data and figures released from China shortly after midday revealed the nation’s manufacturing index fell last month. The China Federation of Logistics and Purchasing showed that the Purchasing Managers' Index dropped 0.8 points to 50.4 in October. The figure above 50 indicates expansion.
Manufacturing activity in Australia dropped at a slower pace last month. The Australian Industry Group and PriceWaterhouseCoopers showed the Performance of Manufacturing Index increased 5.1 points to 47.5 in October, but still remained at a level that indicates contraction.
House prices
Two reports on the value of Australian homes revealed house prices are continuing to drop:
The Australian Bureau of Statistics reported capital city house prices dropped 1.2 per cent in the September quarter and were down 2.2 per cent year on year.
The Housing Industry Association reported new homes sold in September were 3.5 per cent down in the month and 14 per cent down in the September quarter. HIA said the soft figures were proof of why rates had to be cut today.
Company news
All the big banks all lost value today. Responding to the RBA’s rate cut Westpac Banking Corporation (ASX:WBC) Commonwealth Bank of Australia (ASX:CBA) and Bank of Queensland Limited (ASX:BOQ) have announced they too will pass the savings onto customers. Westpac has lowered its standard variable rate by 25 basis points to 7.61 per cent, effective in a fortnight. Commonwealth has lowered its rates on a number of its variable home packages by 25 basis points, to between 6.86 and 7.66 per cent, effective at the end of this week. The cuts could effectively save customers, who have a standard 25-year, $300,000 home loan, $46 per month. Shares in Westpac Banking closed 1.7 per cent lower today at $21.94.
Harvey Norman Holdings Limited (ASX:HVN) will be breathing a sigh of relief after today’s rate cut. The retailer yesterday revealed after the market closed that its September quarter sales fell 3.8 per cent globally and 2.9 per cent in Australia, prompting a sell-off its stock today. Shares in Harvey Norman Holdings closed 3.69 per cent down today at $2.09.
BHP Billiton Limited (ASX:BHP) has approved the development of its $US4.2 billion Caval Ridge Mine coal project in central Queensland, a 50:50 joint venture with Mitsubishi Development Pty Ltd.
Origin Energy Limited’s (ASX:ORG) September quarter production report has shown sales revenue rose 4.3 per cent and production was steady when compared to the quarter before.
Campbell Brothers Limited (ASX:CPB) has stepped up its presence in America, announcing that it has spent $US33 million to acquire a US-based environmental and food analytical group named Columbia Analytical Services.
Super Retail Group Limited (ASX:SUL) has completed its $610 million acquisition of sporting goods retailer, Rebel Group, and appointed a former manager of Rebel to integrate the company into Super Retail’s Sports Retailing division and drive growth.
Best and worst performers
Most sectors closed in the red: The best performing sector, and the only one to close higher, was Telco Services adding 3 points to close at 1,065. The worst performing sector was Materials, shedding 281 points to close at 11,416 points. The best performing stock in the S&P/ASX200 was Bathurst Resources, shares rising 2.56 per cent to close at $0.80. Shares in Transurban Group and Pacific Brands also finished stronger today. The worst performing stock was Energy World Corporation, dropping 8.62 per cent to close at $0.53. Shares in Independence Group and Western Areas also fell today.
Commodities
The price of gold is $US1,718 an ounce.
Light crude is down $0.84 at $US92.35 a barrel.
