[R]3:00AM New York, 7:00PM Sydney – Australia stocks fell 1.6%. Commonwealth Bank of Australia raised rates more than raised by the RBA.[/R]

Market Sentiment

ASX 200 index shed 1.6% or 83.6 to close at 5,180.40.

The preliminary market turnover was 1.69 billion worth $7.19 billion, with 326 stocks moving up, 927 moving down and 341 unchanged. The most traded stock was Empire Oil & Gas with 137.87 million shares trading worth $3.05 million.

Market Driver

Australia''s top mortgage lender, Commonwealth Bank of Australia Ltd announced today that it would increase interest rates on a range of deposit, variable home loan and business loan accounts, reflecting recent increases in market interest rates and wholesale funding costs.

The deposit interest rate on the NetBank Saver and Business Online Saver accounts will increase by 0.25% annually, effective 12th March. The applicable interest rate for the NetBank Saver account is now 7.00% and Business Online Saver moves to 7.15%.

The bank would raise its variable home loan rate by 35 basis points, above the 25 percentage point rise in official rates to 7.25% by the Reserve Bank of Australia last week.

Group Executive Retail Banking Services, Ross McEwan said, ""The Commonwealth Bank has absorbed a significant proportion of the increased funding costs that it has experienced since August 2007. Unfortunately, the volatility in global markets remains and we have seen funding costs continue to increase, particularly since February as funding from global markets has become tighter and as a result more costly.""

This week, the Australian market has seen one of the larger non-bank mortgage lender to stop issuing new loans.


Ross McEwan added, ""Despite this latest increase, which can be directly attributed to the increased cost of funding experienced by all banks, we are still maintaining a balance between the needs of shareholders and customers by continuing to absorb a significant portion of the additional costs being incurred.""

In January, most Australian banks moved their home loan rates independent of a central bank increase for the first time in more than a decade, in response to rising funding costs. Australian interbank rates jumped to their highest in 13 years on Monday as tight global credit markets and mounting risk aversion saw banks hoard cash.

Westpac Banking Corp, Australia''s fourth-biggest bank, raised its variable mortgage rates by 29 basis points, while St George Bank Ltd, the fifth-biggest lender, flagged it would raise rates by about 40 basis points.

CBA shares dropped 1.7%.

Gainers and losers

Of the ASX 200 index stocks, AED Oil Limited led the gainers with a rise of 19.5% followed by increases in Challenger Finance of 19.4%, in Asciano Group of 14.9%, in Babcock & Brown of 6% and in ABC Learning of 5.4%.

Of the ASX 200 index stocks, Allco Finance Group led the decliners with a fall of 11.4% followed by losses in Lynas Corp Limited of 11.4%, in Centennial Coal of 10%, in Macarthur Coal of 10% and in Leighton Holdings of 8.7%.

Babcock& Brown not selling assets

Babcock & Brown confirmed that it has retired over $250 million of short term ''margin'' loans since 31 December 2007 from existing resources and has received commitments for new term finance, to replace all the remaining outstanding ''margin'' loans secured against marketable securities in Babcock & Brown managed funds.