Australia's S&P/ASX Falls to 2 Year Low on Slumping Confidence

By Shani Raja

July 8 (Bloomberg) -- The S&P/ASX 200 Index fell to its lowest in almost two years after Australian business confidence last month slumped to its weakest in seven years, and on concern global credit-market losses will widen.

The benchmark declined 68.70, or 1.4 percent, to 4,933.80 at 3 p.m. local time, its lowest since August 2, 2006. The index has lost more than a quarter of its value since reaching an all- time high on Nov. 1, 2007, as the nation's central bank raised interest rates three times to a 12-year high, and oil prices surged to a record, fanning inflation concerns.

``Sentiment is in the drivers' seat right now,'' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. ``The rise in oil prices is trying to do what the credit crunch so far has failed to do, and that's tip the world into recession. So now you've got these two crises hitting at the same time.''

A measure of financial stocks fell 2.2 percent today, the most among the index's 10 groups. National Australia Bank Ltd., the nation's largest by assets, dropped 2.6 percent to A$26.36, the most in almost two weeks.

Australia's business confidence index dropped to minus 9 points from minus 4 in May, according to a National Australia survey of 335 companies, as cooling domestic demand and spiraling raw-material costs eroded corporate profits.

U.S. stocks fell yesterday, led by Fannie Mae and Freddie Mac, the largest U.S. providers of home-mortgage financing, after Lehman Brothers Holdings Inc. analysts said the companies may have to raise a combined $75 billion.

The following companies were among the index's biggest winner and losers.

Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, lost A$1.19, or 2 percent, to A$58.91, the lowest in more than a month. Santos Ltd. (STO AU) slumped 54 cents, or 2.8 percent, to A$18.86, the lowest since May 16.

Crude oil fell more than $3 a barrel amid signs economic growth is slowing across Europe because of record commodity prices, which may curtail energy demand. Crude for August delivery fell $3.92, or 2.7 percent, to settle at $141.37 a barrel at 2:49 p.m. on the New York Mercantile Exchange.

Allco Finance Group Ltd. (AFG AU), under pressure from bankers to repay debt, gained 2 cents, or 5.8 percent, to 36 cents, the index's second-biggest gainer. The company agreed to sell part of its Singaporean real estate business for S$180 million ($132 million).

Equinox Minerals Ltd. (EQN AU), developing Africa's largest copper mine in Zambia, lost 38 cents, or 8.4 percent, to A$4.12, the lowest since Jan. 22. The company fell the most in two months in Toronto Stock Exchange trading after saying a fire at the site will delay the project's completion.

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