China's sweetener boosts local miners
MINING stocks led the upswing on the local bourse today following on from positive US leads and hope that a multi-billion dollar Chinese infrastructure package could revitalise the flagging metals market.
On the Australian share market, the ASX opened the week higher, taking the lead from Friday's gains on Wall Street and a strong performance among most major miners.
Despite a downturn after lunchtime, the ASX All Ordinaries closed the day up 53.4 points on 4060 points while the S&P-ASX 200 lifted 56.5 points to 4107.8 points.
Positivity surrounded China's announcement of a massive $US586 billion infrastructure spending spree with analysts touting the nation's ability to lift demand for raw materials and soften the grim market mood.
'Beijing has done the right thing to beat market expectations on stimulus package size,'' Morgan Stanley's analyst Jerry Lou said in a client note today. 'That is why we think market sentiment will improve.''
ANZ commodities analyst Mark Pervan said the spend-up would likely foster positive short-term sentiment on commodities but doubted the effect it would have on relatively new projects.
"New projects will probably not have much of an impact during 2009, and therefore won't save the market from a sharp slowdown in the global economy next year," Pervan told Dow Jones newswires.
The stimulus package comes as welcome news for Aussie miners, who flooded the market with a series of production downgrades, reschedule shutdowns and expenditure reviews.
While Rio Tinto lifted a healthy 7.9% ($5.73) to $78, the mining house today announced it would slash its 2008 Pilbara iron ore shipment estimates by around 10%.
The miner blamed falling demand from Chinese customers for its decision to downgrade estimates from 190 million tonnes to a revised estimate of 170-175Mt.
Fortescue Metals Group dealt a similar blow, announcing a rescheduled shutdown would see its 2008 production come in 10% below target. However, unlike Rio, the news pushed the company's stocks down 5.8% (15c) to $2.45.
Meanwhile Rio predator BHP Billiton ended the day up 7% ($1.96) to $29.89.
OZ Minerals boosted its share price nearly 9% to $1.03 after announcing plans for a strategic review of capital and operational expenditure. The diversified miner said it was reviewing how best to allocate cash in the current environment but was adamant commissioning of Prominent Hill would go ahead as scheduled in December.
On the London Metal Exchange tin was the only gainer with spot lead dropping more than 7% to $US1351 and nickel shedding 3.8% to $US10,812.
Spot gold lifted 1.5% to $US746.15 while Aussie gold diggers gave a mostly positive Monday performance. Lihir Gold lifted 4c to $2.11, Newcrest was up $1.50 or nearly 7% to $23.19 and Sino Gold gained 15c to $3.32 on news of yesterday's officially opening of its White Mountain mine in China ( cnmining ).
On the broader economic front, the Reserve Bank of Australia has predicted the economic growth rate to fall to 1.5% to December ' down from 2.7% in the year to June ' as the impact of the financial crisis and declining commodity prices continues to be felt.
Handing down its latest quarterly monetary policy statement, the RBA said global commodity prices have peaked, meaning Australian exporters will face lower prices. However the decline in the Australian dollar will help to offset some of this pain.
The Australian dollar was up slightly to US67.42c.