Australia Stocks Drop on Global Slowdown Concerns; Banks Fall

By Shani Raja

Sept. 23 (Bloomberg) -- Australian stocks fell for the first time in three days on concern the U.S. Treasury's plan to buy toxic mortgage assets won't prevent a recession and that rising oil prices will deepen a global economic slowdown.

Macquarie Group Ltd., Australia's largest investment bank, slumped 4.5 percent, while National Australia Bank Ltd., the nation's largest lender, fell 1.8 percent. Newcrest Mining Ltd. led gains among gold producers as investors bought the metal as a haven from market turmoil.

``Armageddon may have been avoided but there's a realization a couple of years of judgment are still to come,'' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which manages about $128 billion.

Australia's benchmark S&P/ASX 200 Index dropped 97 points, or 1.9 percent, to 4,923.50 at the close of trading in Sydney, ending a two-day, 9 percent jump. The index has fallen 28 percent from its Nov. 1 record as interest-rates at a 12-year high, rising fuel prices, and the global credit crunch threatened economic growth.

The value of shares traded today was A$4.4 billion ($3.7 billion), about 29 percent lower than this year's daily average, after regulators yesterday introduced a ban on short selling.

A gauge of financial companies on the S&P/ASX 200 rose to a two-week high yesterday after Australian regulators banned short selling and the U.S. government proposed a $700 billion plan to avert a financial meltdown. The U.S. Standard & Poor's 500 Index yesterday lost 3.8 percent on concern consumer debt levels and falling employment will crimp growth, while crude oil surged 17 percent, its biggest gain ever.

Commodity Stocks Advance

``The bailout gave the U.S. financial system a cardiac jolt that will prevent it from collapsing, but the economy is still in intensive care,'' said Prasad Patkar, who helps manage the equivalent of $1.8 billion at Platypus Asset Management in Sydney. ``It'll take some time for improved growth to become evident.''

The Australian Securities & Investments Commission said on its website today that the prohibition on covered short sales will not apply to hedging for existing positions, certain dual- listed entities, exchange-traded options, market makers and index arbitrage transactions.

Macquarie Bank fell 4.5 percent to A$36.10, snapping a two- day, 45 percent surge. National Australia Bank lost 1.8 percent to A$23.86, having climbed 24 percent in the past two days.

``As yet, the Fed hasn't released the details of how their rescue package is going to be implemented,'' Rod Skellet, head of global markets at BBY Ltd., told Bloomberg TV in an interview today. ``The market is very wary of things it doesn't know.''

Airlines Decline

Airlines fell on concern jet-fuel costs will increase after oil for November delivery surged 6.4 percent to $109.37 a barrel in New York. Qantas Airways Ltd., Australia's largest carrier, declined 2.4 percent to A$3.24, the lowest since July 16. Virgin Blue Holdings Ltd. plunged 9.1 percent to a record low 40 cents.

Newcrest, Australia's largest gold producer, surged 5.3 percent to A$26.84, the highest close since Aug. 29. Lihir Gold Ltd. jumped 4.5 percent to A$2.77, the highest since July 30. Gold futures rose 5.1 percent.

The following shares rose or fell today. Stock symbols are in parentheses after company names.

OM Holdings Ltd. (OMH AU), an Australian manganese producer, slumped 11 cents, or 4.9 percent, to A$2.16. OM said 1.9 million shares were issued following the exercise of unlisted options, and that 60,000 unlisted options have been canceled.

OZ Minerals Ltd. (OZL AU), the world's second-largest zinc mining company, advanced 10.5 cents, or 6.6 percent, to A$1.71, the highest since Sept. 3. The company said it can finance its development projects without having to access financial markets.

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