Australia Market Report of August 7: Aussie Dollar Down on US Confidence Rebound

Sydney, Aug 7, 2008 AEST (ABN Newswire) - The Australian stock market may rise slightly after oil continued to slide, and transport and consumer related stocks may firm on the back of further fall in oil prices.

At 0700 AEST, the Australian dollar was trading at $US0.9082/87, down from yesterday's close of 0.9197/02. It was the domestic currency's lowest opening since April 2, when it began the local session at $US0.9064/66. A falling oil price increases consumer confidence in the US economy may rebound by the end of the year, which helps stimulate the confidence in the US dollar.

The Australian share market gained more than three per cent yesterday, buoyed by a strong US lead and hopes of cuts to domestic interest rates. The benchmark S&P/ASX200 index closed 148.7 points, or 3.08 per cent higher at 4969.1, while the broader All Ordinaries climbed 136.1 points, or 2.79 per cent to 5018.1.

At 0750 AEST, the September share price index futures contract on the Sydney Futures exchange was 15 points higher at 4,986.

Key Economic Facts and Figures

The prospect of the big banks choosing not to pass on the full effects of an interest rate cut by the Reserve Bank to mortgage borrowers receded yesterday, after new figures showed home-loan lending had slowed to its weakest level for 20 years.

The 25 per cent drop in new mortgage commitments for the first half of this year also countered a growing belief within the banking industry that the leading five banks might hold back part of any RBA-sanctioned interest rate reduction.
The housing finance figures from the Australian Bureau of Statistics (ABS) showed the number of approvals for owner-occupier home loans fell 3.7 per cent in June.

The total value of lending, including loans to investors, fell by 0.9 per cent.
The employment index dropped by 1.7 points to 43.2, the fourth straight month of contraction. Government figures on the labour market are due later on Thursday and analysts expect only a marginal rise in employment in July.

The Australian job market has become more hostile for jobseekers, new figures show. The SEEK (ASX:SEK) Employment index, the ratio of online job advertisements to applications, fell by 4.4 per cent in July to 76.0 index points, seasonally adjusted.

A survey by the Australian Industry Group-Housing Industry Association shows performance of construction index (Australian PCI) rose by 1.3 index points in July to 41.6 points.

M&A News

Cape Lambert Iron Ore Ltd (ASX:CFE) has today completed settlement of the A$400 million sale of its project to China Metallurgical Group Corp as it receives the first payment of a$240 million. MCC has formed a partnership with Evraz Group SA, Russia's second largest steelmaker, to develop the project.

Carlyle Group, TPG and Apollo Management may bid for Rio Tinto Group's (ASX:RIO) aeronautics and automotive unit as the mining company tries to sell assets and repel BHP Billiton's (ASX:BHP) hostile takeover offer. It rumours that Rio is seeking offers for Alcan Engineered Products, which it values at about $US6 billion ($6.6 billion), by the middle of next month.

Important Corporate News

Tabcorp Holdings (ASX:TAH), Australia's top gaming group, reported a net loss after tax of A$164.6 million after taking a charge on Victorian gaming licences, the company said in a statement. Tabcorp shares are down about 42% in 2008, nearly double the drop in the benchmark S&P/ASX 200 index.

Fortescue Metals Group Ltd (ASX:FMG) has signed an agreement with Atlas Iron Ltd (ASX:AGO) to earn up to an 87.5 per cent stake in the low-grade Abydos iron ore project in the Pilbara region of Western Australia. Atlas said the primary focus of the joint venture was to define and develop extensions to Fortescue's Glacial Valley magnetite deposit.

National Australia Bank (ASX:NAB) is likely to send more of its 2600 information technology jobs offshore, following a major restructure of its IT services group to support its A$1 billion core banking overhaul.