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Market Update

6-Day Rally in Australian Stocks, Fortescue Shipment Surges 47%

Author: Marcus Jacob
Last Update: 8:18 AM ET January 29 2015

5:30 PM Sydney Australian dollar held firm but analysts raised the prospect of the currency to drop as low as 72 U.S. cents. Fortescue Metals reported 47% increase in shipment in the first-half and also cut in half its planned capital spending but said production cost is expected hover near $25 a ton.

Australian stocks advanced after a volatile session and investors remained cautiously optimistic in the backdrop of weakening growth rates in China and domestic inflation.

Weak commodities prices are helping domestic inflation and retail sales but are also contributing to the sharp cut backs in capital spending from resource companies.

Fortescue Metals, Beach Energy, Lynas Corp and Oil Search are some of the latest companies to announce cuts in capital spending plans of as much as 50%.

Export price in the fourth-quarter unchanged from 3.9% drop in the third-quarter and for the year prices declined 9.1%, the Australian Bureau of Statistics said in a report today.

Import prices in the quarter climbed 0.9% after decreasing 0.8% in the previous quarter and for the year import prices added 0.3%.

The Conference Board said leading economic index in November slightly improved to 0.1% followed by 0.2% fall in October.

Australian dollar closed at 78.67 U.S. cents and in stock-trading turnover climbed to 916 million shares worth $5.52 billion.

ASX 200 Index gained 16.70 or 0.3% to 5,569.50 and broader All Ordinaries Index rose 15.60 to 5,532.20.

In commodities trading, gold slipped US$8 to US$1,282 an ounce and light crude oil declined $1.78 to US$44.45 a barrel.

Brent crude increased 44 cents to close at US$48.91 a barrel.

Australian Stock Movers

Beach Energy Ltd declined 3.2% to 90 cents after the oil and gas explorer revised its full-year production guidance range between 8.9 million barrels and 9.4 million barrels of oil equivalent from 8.6 million barrels to 9.4 million barrels.

The company reduced capital expenditure estimate for the year in the range of $430 million to $470 million.

Fortescue Metals Group Limited surged 9.3% to $2.23 after the iron ore producer reported shipments in the first-half soared 47% from a year ago period and estimate iron ore in the year ending in June to ship between 155 million tons and 160 million tons.

In the quarter, Fortescue shipped 41.1 million tons 47% above its own forecast but average selling price dropped to US$63 per dry metric ton delivered to China.

The miner forecasted iron ore production cost between $25 and $26 per wet metric ton in the second-half and halved its planned capital spending of $650 million in this year.

During the quarter, the company completed debt repayment of US$500 million to reduce gross debt to US$9.1 billion.

Oil Search Limited dropped 1.2% to $7.70 after the oil and gas explorer posted record annual production of about 186% to 19.27 million barrels of oil equivalent.

Revenues climbed 110% to US$1.61 billion and the company said it is reassessing its spending plans after the recent plunge in oil price of more than 50%.

Westpac Banking Corp slid 0.1% to $34.64 after the financial service provider agreed to sell its banking operations in five Pacific Island nations for about $125 million to the Bank of South Pacific Ltd.

The transaction is expected to close in mid-2015.

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc