Reserve Bank leaves room for May interest rate rise, Harvey Norman sales flat: Economy Roundup

The Reserve Bank of Australia has announced that a higher-than-expected rise in terms of trade influenced its decision to increase the official interest rate by 25 basis points to 4.25% earlier this month, the minutes of latest meeting have revealed.

It also said global economic conditions are continuing to improve, leaving room for another rate rise in May as the RBA moves rates towards more normal levels.

The bank said that a prospective rise in terms of trade would mean that “it might be prudent not to delay adjustment”. It additionally noted that major advanced economics are recovering, albeit tentatively, and that expansion within Asia was “proceeding strongly”.

“While there were a number of risks to the outlook for the global economy, the most likely scenario was one where growth in global output was close to trend over the next few years,” the board announced.

“Overall, members considered that the outlook for the economy suggested that there was a case for a further step in the process of returning interest rates to more normal levels.”

In retail, Harvey Norman has announced flat sales in Australian operations for the third quarter of the 2010 financial year compared to the previous corresponding period, while sales grew by 1.2%.

In the nine months ending March 31, total and like-for-like sales grew by 4.3%. Sales from Australian, New Zealand, Slovenia and Ireland operations excluding Singapore grew to $4.64 billion, equating to 2.2% growth.

Additionally, the company has said sales were affected by the 2.9% decline in the value of the New Zealand dollar, with a 13.6% decline in the Euro and a 21.6% decline in the value of the British Pound.

In the mining sector, Fortescue Metals has announced it expects production to remain steady during the next three quarters following a 53% increase in shipments for the March quarter.
In its quarterly report, the company said iron ore shipments totalled 9.45 million tonnes for the quarter ending March 31, compared to the previous corresponding quarter.

The company maintained productivity and shipping forecasts of about 40 million tonnes per year during the period, and said operating costs are expected to be $US30/tonne for the next three quarters.

Shares higher after Wall Street rally

The Australian sharemarket has opened higher today, lifted by Wall Street stocks where investors recovered from the shock of seeing Goldman Sachs accused of fraud by corporate regulators.

The benchmark S&P/ASX200 index was up 15 points or 0.32% to 4930.8 at 12.10 AEST, while the Australian dollar also opened higher to US92, boosted by comments from the Reserve Bank of Australia regarding the growing economy.

ANZ shares gained 0.2% to $25.13, as Commonwealth Bank shares rose 0.4% to $59.35. NAB rose 2.5% to $28.77 as AMP lost 3% to $6.21.

Shares in Seven Network have been placed in a trading halt pending the outcome of a shareholder vote on the proposed merger with WesTrac holdings.

In a statement to the Australian Securities Exchange, the company has requested its shares be put on hold until the results are announced. The plan is proposed to merge with the Caterpillar dealership, which is owned by Kerry Strokes’ privately owned company.

Macarthur Coal has announced it will continue talks with Noble Group regarding a possible deal on the Middlemount joint venture operation. It follows a meeting of Noble shareholders, in which the group rejected a takeover bid from Macarthur regarding Gloucester Coal.

“The Macarthur Board is currently considering the consequences this may have for Macarthur’s takeover offer for Gloucester and its acquisition of Noble’s interests in Middlemount including the exclusivity provisions contained in the bid implementation agreement with Gloucester,” Macarthur said in a statement.

Meanwhile, Newcrest Mining has said the company will move to prepare improvements to the structure of its $9.2 billion takeover offer for Lihir Gold following several consultations.

“We are prepared to improve our offer structure to enable shareholders wanting more scrip and less cash (or vice versa) to have that option through a ‘mix and match’ structure, subject to caps,” Newcrest chairman Don Mercer said in a letter to Lihir chairman Ross Garnaut.

“We note Lihir’s comments last week that a data room has now been prepared to assist potential acquirers,” Newcrest said. “We would reasonably expect to be given access to that data room to assist our ongoing review.”

Nufarm has just launched an underwritten $250 million capital raising to all shareholders, following an earlier trading halt. It comes after the company’s shareholders approved a tender offer from Sumitomo Chemical to acquire 20% of the issued capital in the company.

“There is a significant medium- to long-term benefit arising from the company’s ability to pay down debt from proceeds secured in the capital raising,” Nufarm managing director Doug Rathbone said in a statement.

“A stronger, more flexible balance sheet will ensure Nufarm is better positioned to support the ongoing growth of the company.”

Rio Tinto postpones Australian AGM

Mining giant Rio Tinto has postponed its Australian annual general meeting to May 26 due to the travel restrictions currently imposed in Europe following a volcanic eruption in Iceland.

“In light of the unprecedented travel restrictions in Europe, it is not possible for the chairman, chief executive or other Rio Tinto directors to arrive in Melbourne in sufficient time for the Rio Tinto Limited annual general meeting scheduled for 0930 (AEST) on Thursday, April 22, 2010,” the company said in a statement to the ASX.

Overseas, the United States Department of Commerce is currently deciding whether it will launch an investigation into charges that China is subsidising exports of aluminium by undervaluing its currency. The department has turned down investigations of a similar nature before.

On Wall Street, stocks rose as investors calmed from the shock of seeing Goldman Sachs accused of fraud by regulators. The Dow Jones Industrial Average rose 73.39 points, or 0.67%, to 11,092.05. The Standard & Poor’s 500 Index grew by 5.39 points, or 0.45%, to 1,197.52