Australia Stocks Slump, Led by Banks on Credit Loss Concerns

By Shani Raja

July 29 (Bloomberg) -- Australian stocks fell, led by banks on concern losses could widen after the International Monetary Fund said yesterday that worsening credit conditions may prolong the global economic slowdown.

National Australia Bank Ltd. shares slumped to the lowest in almost seven years after the IMF said there is no end in sight to the U.S. housing slump. Commonwealth Bank of Australia dropped to its lowest in two weeks.

The S&P/ASX 200 Index declined 71.70, or 1.5 percent, to 4,850.40 at 11:10 a.m. in Sydney, extending this year's loss to 24 percent.

The world's largest banks and securities firms have posted about $469 billion in losses and writedowns since the onset of the subprime crisis last year. Australian & New Zealand Banking Group Ltd. slumped the most in 21 years yesterday after forecasting the biggest full-year profit drop since 1992 as bad loans swell, while National Australia last week raised provisions for mortgage-related losses.

Merrill Lynch & Co., American International Group Inc. and Fannie Mae led U.S. financial shares to a third straight drop in trading yesterday following the IMF's remarks. Separately, Merrill said it will record $5.7 billion of pre tax writedowns in the third quarter because of additional losses on the sale of collateralized debt obligations.

The following companies were among the biggest movers on the Australian stock exchange.

Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, extended yesterday's 2.9 percent gain, adding 44 cents, or 1.2 percent, to A$38.44. Rio Tinto Group (RIO AU), the third largest, jumped A$1.05, or 0.9 percent, to A$119.65.

A measure of six metals traded on the London Metal Exchange rose 1.3 percent. Zinc gained 4.3 percent, copper 0.5 percent and nickel 1.6 percent.

Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, rose A$1.81, or 3.6 percent, to A$52.06, the most since July 11 and the benchmark's second- biggest gainer. Santos Ltd. (STO AU), Australia's third-largest oil and gas producer, advanced 56 cents, or 3.3 percent, to A$17.65, the most since June 6.

Crude oil rose after Royal Dutch Shell Plc reduced Nigerian production because of an attack on a pipeline by militants. Crude for September delivery rose $1.47, or 1.2 percent, to settle at $124.73 a barrel at 2:49 p.m. on the New York Mercantile Exchange. Separately, Santos named David Knox as Chief Executive Officer, four months after he was appointed in an acting capacity.

Alesco Corp. (ALS AU), an Australian building materials and home products maker, lost 86 cents, or 11 percent, to A$6.95, the most in 18 years, after saying that matching its 2008 result in 2009 will be ``challenging.''

Fairfax Media Ltd. (FXJ AU) slumped 6 cents, or 2.1 percent, to A$2.78, its lowest in almost two weeks. The company is in talks to sell off its television production unit, Southern Star, eight months after buying it for about A$150 million, the Sydney Morning Herald reported, citing sources it didn't name.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.