Shares Slide On Weakness In Commodities And Spi

The Age

Thursday July 7, 1994

DAVID ADAMS, LISA KEARNS

A sharp fall in commodity prices and bearish sentiment on the futures market yesterday combined to push the sharemarket into a 29-point dive.

The All Ordinaries index fell 1.5 per cent to 1962.2 points in what industry sources described as an across-the-board fall.

At the Sydney Futures Exchange the September Share Price Index fell 37 points or 1.9 per cent to close at 1952.0 points.

Elsewhere on Australian financial markets, yields on the benchmark Commonwealth September 2004 bond firmed to 9.57 per cent from 9.60 previously as bond dealers took advantage of a lull in trade after the US Federal Open Market Committee meeting ended without a rise in interest rates there.

But in Australia the economic forecaster Access Economics has warned in its July report that the Reserve Bank should act now to raise short-term interest rates to dissipate inflation fears.

``The Reserve Bank has to get ahead of market expectations in raising short rates before it will get long rates to fall again," the report said. ``If the first rise in short rates is delayed or is a small one, clients should expect continued bouts of bond selling to force further short interest rate rises."

After gaining almost one US cent during offshore trade, the Australian dollar was dragged lower but managed to hold on to most of its gains, closing at 73.15 US cents from 72.40 at the local close.

A Dresdner International currency dealer, Ms Joanne Turnbull, said neutral June unemployment data did not have a big impact on the currency, with traders looking for direction from US non-farm payroll data due tomorrow and the Naples meeting of the Group of Seven industrialised nations. ``There's still a fair amount of volatility in the US dollar and it won't get any better coming up to the weekend.

The (Australian) dollar will be affected negatively by that."

On the Reserve Bank's trade-weighted index, the Australian dollar climbed to 53.2 points from 52.6.

The fall in the equities market was led by blue-chip resource stocks, which brokers said fell in response to falling commodity prices.

At the London Metals Exchange overnight, aluminium fell 1.3 per cent to $US1486 a tonne, zinc 1.5 per cent to $US948 a tonne and silver 1.5 per cent to $US5.24 an ounce.

In the US, the influential daily Commodity Research Bureau Futures price index dropped 0.6 per cent to close at 225.31 points. Since reaching a mid-June high of 239.72 points, the index has shed around six per cent.

The All Resources index lost 23 points, or 1.8 per cent, to close at 1260.3, and the All Mining tumbled 19.6 points, or two per cent, to close at 963.8.

Brokers said Western Mining's announcement of a $720 million rights issue was poorly received by the market. Western Mining shares dropped a further 28 cents, or four per cent, yesterday to close at $6.73.

A senior analyst with Austock Brokers, Mr John Roysmith, described sharemarket sentiment as bearish. While interest rate fears had been quelled, investors remained nervous about the future. ``Everyone expects further volatility into the next period."

Reuter reports: the Bundesbank's policy-making council left official interest rates unchanged at its council meeting late last night.