Shares Hit By Fears Over Us Jobs Data

The Age

Friday September 6, 1996

Manika Naidoo

Australian stocks plummeted yesterday as fears of higher than expected US employment figures were coupled with plunging commodity prices.

A nervous market dropped 20.4 points to 2237.00 after the All Ordinaries Index tagged a bearish Wall Street, which closed at its lowest level since 31 July - down 50 points to 5607.

The notoriously volatile US employment figures - which were to be released last night - spooked investors, who feared revelations of high growth would spur the Federal Reserve to raise interest rates.

Soft commodity prices hit resource stocks. The copper price for December delivery fell 5.7 per cent in New York on Thursday night amid fears that Chile mine expansions would choke market demand.

BHP, which owns 57.5 per cent of Escondia in Chile, the world's largest copper mine, closed 30 cents lower at $16.

76. WMC dropped 14 cents off its share price to $8.45, and CRA shares tumbled 35 cents to $18.72.

Mr Enzo Salvatore, from Austock brokers, said WMC's poor showing was also due to Thursday's profit announcement. ``WMC's profit result was lower than the market expected. This combined with lower commodity prices overnight and a generally weaker market, affecting their share price," he said.

Bank stocks closed mixed ahead of weaker bonds. National Australia Bank lost six cents to $12.26, ANZ shed two cents to $6.45, Westpac was down three cents to $6.15, while Commonwealth Bank bucked the trend, climbing one cent to $10.75.

Despite the property and financial services group Lend Lease posting a 7.6 per cent rise in net profit to $280 million, it was still unable to shake the downhill trend, closing 43 cents down at $20.55.

Local bond prices recovered at the market close, after lower US bond prices triggered an early fall. A Citibank trader, Mr Robert Bedwell, said ``short covering caused the market to rally at the death".

One dealer said an unemployment figure above 300,000 would sour the bond market. ``A lot of negativity has already been priced into the number. The market's been nervous all week.

But if it turns out to be a bit benign the market will rally, " he said.

At the short end, yields in 90-day bank bills closed slightly weaker at 6.96 while, at the longer end, yields in 10-year bonds dropped from 8.20 to 8.19.

The Australian dollar strengthened sharply, with stronger buying inspired by Thursday's comments from the governor of the Reserve Bank, Mr Bernie Fraser, ruling out interest rate cuts in the short term.

It traded between 79.3 and 79.6 US cents before closing firmer at 79.44 US cents, up 0.41 US cents.