[R]3:00AM New York, 7:00PM Sydney- ASX 200 index fell 0.2% despite late rally in mining stocks.[/R]

Market Sentiment

ASX 200 index lost 0.2% or 12.7 to close at 5,596.70.

The Preliminary market turnover was 407.7 million shares worth $861.4 million, with 108 stocks moving up, 774 stocks moving down and 224 unchanged.

Market Drivers

The Australia and London listed arms of Rio Tinto today unanimously rejected the BHP Billiton Ltd''s, 3.4 BHP shares for one Rio Tinto share bid for the second time in as many months, saying that the offer ""significantly"" undervalued the mining company.

The directors said the decision had been reached after they had given ""careful consideration"" to the offer made public earlier in the day. Rio''s chairperson Paul Skinner said in a statement: ""BHP Billiton''s offers, while improved, still fail to recognise the underlying value of Rio Tinto''s quality assets and prospects. Our plans are unchanged, and will remain so unless a proposal is made that fully reflects the value of Rio Tinto.""

The offer requires acceptances from 50% or more shareholders of the publicly held shares in each of Rio Tinto limited, Rio Tinto plc and BHP Billiton.

Meanwhile Rio today announced 3 billion ton increase in its iron ore resource base in Western Australia. Analysts believe that the disclosure was designed to put more pressure on BHP Billiton to increase its bid for the company. Rio Tinto shares lost 0.1% while BHP Billiton added 0.7%.

Interest rates to rise

After the Reserve Bank of Australia raised its interest rates by 0.25% to 7% local banks have quickly passed the rate hike to customers despite vocal opposition from politicians.

The National Australia Bank announced that it would increase its interest rates within days but did not say by how much.

The Commonwealth Bank raised its interest rates yesterday by 0.3% while Westpac and St George Bank today increased their rates by 0.25%. Adelaide and Bendigo Bank have also announced they are passing on the increase in official interest rates to customers.


Gainers and losers

Of the ASX 200 index stocks, Allco Finance Group led the gainers with a rise of 12.8% followed by increases in Centro Properties of 12.3%, in Centennial Coal of 7.7%, Queensland Gas of 6%, and in Dyno Noble Ltd of 5.8%.

Of the ASX 200 index stocks, AED Oil Limited led the decliners with a fall of 12.7% followed by losses in IOOF Holdings Lt of 10.3%, in Futuris Corp Ltd of 6.5%, in Sally Malay Mini of 6.5% and in Boom Logistics of 5.5%.


Futuris predicts strong results

Agribusiness Futuris Corp Ltd today announced that it was expecting a strong performance ahead of the release of its earnings in the second half of the financial year, despite booking a lower first half net profit.