Market comes back to earth

REALITY bit investors today, with ongoing debt problems in Greece and poor leads from the US taking their toll on the Australian market.

Christine Feary

The Greek recovery from high debt levels has been undermined by its banks, which have put their hands out for around €17 billion ($A24.4 billion).

Prime Minister George Papandreou said the eurozone-International Monetary Fund agreement made last month to help the country avoid bankruptcy meant Greece would survive the crisis; however, this confidence was not shared by local shareholders.

In the US, the remarks of Kansas City Federal Reserve president Thomas Hoenig that interest rates should not be kept low for much longer were enough to turn investors off.

Hoenig suggested that keeping interest rates below 1% for too long could see a bubble form, which would be risky for the country’s economy.

The Dow Jones dropped 0.7% on the comments, closing at 10,897.52 points.

In Australia, the situation was not helped by the release of data showing the unemployment rate for March had not changed.

The Australian Bureau of Statistics today said the unemployment rate remained steady at 5.3% in March. The number of people employed grew by 19,600, driven by a rise in full-time employment, but this was offset by a fall in part-time employment.

The All Ordinaries and S&P-ASX 200 both dropped by 0.4% today, finishing at 4960.3 points and 4937.9 points respectively.

Negativity in the market had an impact on the local resource industry, with BHP Billiton and Rio Tinto experiencing the largest falls overall today.

Rio declined A86c to $80, while BHP dropped 82c to $43.75.

It was also a bad day for metals, with overnight prices on the London Metal Exchange dropping almost across the board.

Tin was the only metal to stay in green territory, rising 1% to $US18,505 per tonne. Zinc shed 2% to $2366.50/t, copper dropped 0.6% to $7914.50/t and nickel fell 0.5% to $24,678/t.

The spot price of gold also fell, trading at $1146.95 per ounce, down 0.2%, at 3.55pm AEST, though this did not have a great impact on local traders.

Eldorado Gold had the highest real-term gain of the day, rising A98c to $14.56 on no news, while Newcrest continued its upward trend with a 23c increase to $35.50.

In percentage terms, coal plays East Energy and MetroCoal both performed well, East Energy gaining 62%, or 6.5c, to 17c and MetroCoal gaining 28.6%, or 6c, to 27c.

Explorer East Energy’s share price was boosted by positive initial drilling results in the northern half of its Blackall tenement in Queensland’s Eromanga Basin.

The results indicate coal seams that are continuous to the north and are of similar thickness and quality to the south, where a 1.2 billion tonne JORC inferred thermal coal resource has been discovered.

Shares in MetroCoal jumped after the company announced a $30 million joint venture deal with a subsidiary of China National Coal Group.