Metal Price Fears Drag Stocks Down

The Age

Tuesday October 7, 1997

DAVID SAUNDERS

Resource stocks again had the most influence on a quiet market yesterday, with falling commodity prices sending the producers lower.

Metal stocks were undermined by further drops in commodity prices, with zinc hitting a five-month low on the London Metal Exchange. The fall was blamed on delayed ordering by consumers, sparking concerns that demand would remain low while the market was volatile.

The world's biggest zinc producer, Pasminco, slipped a cent to $2.25 and was the most heavily traded stock in the top 50 companies, with more than five million shares through the market.

Nickel for three-month delivery fell $US80 a tonne to $US6650 as investors feared European demand would fall as scrap-metal exports from Russia swamped the market.

WMC fell 17 cents to $6.51, while QNI was down three cents at $1.80. Anaconda Nickel rose three cents to $3.60.

In contrast, copper rebounded 2.1 per cent on reports that US demand would outweigh growing inventories. Last week copper came under pressure, falling to an 11-month low after a report that the world's biggest producer, Chile, had increased its output by 5.4 per cent in the year to August.

BHP climbed back over the $16 mark for the first time in days, rising 18 cents to $16.07.

However, MIM was off six cents to $1.61 while Rio Tinto rose five to $21.05.

Among the the gold stocks, Newcrest rose 11 cents to $2.78, a 4 per cent jump, after rumors that the resource estimate at its Ridgeway gold prospect in New South Wales was bigger than expected.

Newcrest also gathered momentum after the announcement on Monday that it would quit its stake in Normandy. The Gold Index's biggest stock fell five cents to $1.76.

Sons of Gwalia rose three cents to $4.58 after the market learnt that the company had raised its resource estimate at the eponymous underground mine in Western Australia by more than 50 per cent.

Acacia came off six cents to $1.77, while Lihir was also off six at $2.33.

The All Ords crawled to a 15.4-point drop, closing at 2754.3, leaving brokers bewildered at how subdued trade was. The market appeared to ignore Wall Street, where the Dow Jones Industrial Average finished 0.8 per cent higher at 8100.22.

Turnover on the local market was $630.4 million. Brokers said the weakness reflected concerns that the Reserve Bank, which met yesterday, might hold off cutting interest rates again in the light of data out on Monday that showed a seasonally adjusted 2.9 per cent rise in advertised jobs in September. The market was also hesitant before tomorrow's release of employment numbers for last month.

Industrial stocks ended little better than the resource sector, although banks were among the most resilient, with many coming off lows during the day.

Commonwealth Bank rose 10 cents to $17.36 against a negative market, while National Australia Bank closed 6.6 cents higher at $21.81, having earlier slipped to $21.733.

Coca-Cola Amatil shares fell 6 per cent after the Philippine peso hit an all-time low during the morning. Investors feared the implications of the currency crisis in the Philippines as more than half of the soft drink and snack food group's earnings next year will come from its bottling operations there, acquired by the company earlier this year. Coke recovered some lost ground to end 82 cents down at $14.30.

In the media sector, News Corporation slipped two cents to $6.94 as the company held its annual meeting in Adelaide. Its preference shares rose six to $6.10.

Mr Rupert Murdoch's global empire received some positive news when US anti-trust authorities approved its $US1.35 billion ($A1.87 billion) purchase of Heritage Media.

John Fairfax fell two cents to $3.41, while Publishing and Broadcasting was steady at $8.87.

On the last day of trade before it goes ex rights, the pharmaceutical company Biota rose 14 cents to $4.25.

Stockwatch

Gambling stocks have been in the wilderness for some time, but maybe they are on the improve.

News on Monday that Crown would buy the management rights for Melbourne's casino from Hudson Conway in a scrip deal and would lease the Capital Golf Course, lifted the spirits of long-suffering investors who had seen the stock slide from $2.94 before the casino opened to a low of $1.46 last month. Yesterday it closed at $1.58, taking to eight cents its gains in two days.

Meanwhile, Sydney Harbour Casino Holdings gained a cent to $1.96 after reports that its management rights buyout was nearing fruition.

Money

The dollar pulled back yesterday on the back of weaker commodity prices and apprehension about the next movement on official interest rates.

The currency fell to 72.30 US cents as the Reserve Bank board gathered for its monthly meeting. There was no word on rates but, while many market watchers were not expecting a cut immediately, most still believed the RBA would act soon.

Bond prices fell, dragging yields higher. The rate for 10-year paper rose seven points to close at 6.12 per cent while the three-year rate jumped 16 points to 5.30 per cent, its biggest one-day jump in almost two months.

The sharemarket drifted down in lacklustre trade yesterday, with waning hopes for an interest rate cut sapping investor enthusiasm. The All Ords closed 15.4 points lower at 2754.3, with metal stocks down because of weaker commodity prices. The Metals Index fell 1.8 per cent. Before local trade opened New York's Dow Industrial Average rose 61.64 points, or 0.8 per cent, with investors encouraged by the benign inflation outlook in the US. The S&P 500 rose 0.8 per cent to 972.69.