Metal Prices Hit Market

The Age

Thursday June 6, 1996

STEWART OLDFIELD

Crumbling world metal prices dragged the share and currency markets lower yesterday, taking some gloss off the resource sector's strong performance in recent months.

Some brokers were making gloomy forecasts for resource stocks last night as copper and aluminium prices dropped to two-year lows in London trade.

``If we wake up with those prices (today), this market is going to take a drubbing," one said.

Gold closed on the local market at $386.30 yesterday after losing $1.70 in New York trade on Wednesday night.

Acacia Resources lost eight cents to $3.25 and Newcrest Mining dropped 13 cents to $5.38.

The All Ordinaries fell 15.9 points to 2213.8 with the resources index contributing most to the decline by dropping 1.7 per cent or 25.3 points to 1424.

The Australian dollar also struggled in response to the commodities gloom by closing at 79.07 US cents, down from Wednesday's close of 79.42 cents and well down from its recent highs of about 80.20 US cents.

Despite a 32-point gain in Wall Street's Dow Jones index on Wednesday night, the sharemarket responded to a drop of 6.9 US cents a pound in the copper price, and a drop of $US15.

50 a tonne in the aluminium price.

One broker said trends in world commodity prices were a far more accurate lead to the Australian bourse compared with the Dow Jones index because commodity prices had a more direct impact on the bottom line of resource stocks.

Comalco dropped 27 cents to $7.05, BHP lost 23 cents to $18.45 - almost $1.50 off its high on 7 May - and Western Mining Corporation dropped 17 cents to $9.13.

Investors flew to industrial stocks, particularly the banks, for safety, brokers said.

The All Industrials lost 5.4 points to 3264.7 with National Australia Bank climbing two cents to $11.56, ANZ adding one cent to $5.56, Westpac losing one cent to $5.39, and the Commonwealth Bank losing three cents to $10.01.

One broker said the market was anxious to see the price of the sale of Lend Lease Corp's stake in Westpac.

The bond market strengthened marginally, with yields in 10-year bonds dropping five basis points to 8.9 per cent.

Reuter reports: The Bank of England yesterday unexpectedly cut interest rates by a quarter of a percentage point to 5.

75 per cent in a move that the Finance Minister, Mr Kenneth Clarke, said was justified by falling inflation. Other banks immediately followed suit. The Midland Bank said it was also cutting its base lending rate to 5.75 per cent.