Australia's S&P/ASX Index Gains as Credit Market Worries Abate

By Shani Raja

July 17 (Bloomberg) -- Australia's S&P/ASX 200 Index rose, led by banks, as credit market concerns receded after higher- than-estimated profit at Wells Fargo & Co. sparked the biggest- ever gain in U.S. financial shares.

Australia & New Zealand Banking Group Ltd., the country's third-largest lender, climbed to its highest in more than a week, while Commonwealth Bank of Australia, the nation's biggest mortgage lender, gained the most in three weeks.

The benchmark added 1.1 percent to 4,923.40 at 10:30 a.m. in Sydney, extending yesterday's 1.1 percent gain.

The S&P/ASX 200 has tumbled 28 percent since reaching a high on Nov. 1, 2007, after U.S. subprime-related losses tightened global credit markets, adding to bank funding costs.

The U.S. Standard & Poor's 500 Financials Index surged 12 percent yesterday, leading the S&P 500 Index 2.5 percent higher to 1,245.36, rebounding from its lowest level since 2005.

Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, declined A$1.23, or 3.1 percent, to A$38.06, the lowest since April 2. Rio Tinto Group (RIO AU), the world's third-largest mining company, slipped A$3.82, or 3.2 percent, to A$117.62, the lowest in almost four months.

A measure of six metals traded on the London Metal Exchange fell 1.5 percent. Zinc declined 2.4 percent, copper 0.8 percent and nickel 2.2 percent.

Allco Finance Group Ltd. (AFG AU), selling assets to repay loans, jumped 4 cents, or 9.5 percent, to 46 cents, the index's biggest gainer. The company completed the sale of its Tehachapi wind power project in California, reducing its debt by A$230 million ($224 million).

Newcrest Mining Ltd. (NCM AU) declined 90 cents, or 2.7 percent, to A$32.40, the most since July 7. Gold tumbled the most in three weeks in New York after a drop in energy costs reduced demand for the precious metal as a hedge against inflation. Sino Gold Mining Ltd. (SGX AU) was the index's biggest loser, dropping 35 cents, or 6.4 percent, to A$5.15, the most in more than a month.

Qantas Airways Ltd. (QAN AU), Australia's largest airline, rose 14 cents, or 4.4 percent, to A$3.31, the most since the start of the month. Qantas may cut as much as 5 percent of its workforce next week as the carrier attempts to battle the cost of higher fuel prices, the Adelaide Advertiser reported, without saying where it got the information.

Virgin Blue Holdings Ltd. (VBA AU), Australia's second- biggest airline, rose for a fourth day, adding 4 cents, or 6.8 percent, to 71 cents, the highest since May 28, on speculation its spin-off from Toll Holdings Ltd. may lead to a takeover bid.

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