Australian Stocks Drop on Concern U.S. Plan Won’t Ease Crisis

By Shani Raja

Feb. 11 (Bloomberg) -- Australian stocks fell, led by banks and commodity producers, on concern U.S. President Barack Obama’s plan to revive the economy and financial system may not be enough to stem the global recession.

National Australia Bank Ltd., the nation’s biggest by assets, dropped 1.3 percent, following U.S. banks lower after U.S. Treasury Secretary Timothy Geithner said the recovery plan, including limits on bank dividends and acquisitions, will “take time” to bear fruit. BHP Billiton Ltd., the world’s largest mining company, slid 2.7 percent as oil and metals prices plunged.

“It’s almost as if the market seems to be unhappy with any solution that doesn’t involve full nationalization of the banks,” said San Francisco-based Robert Horrocks, who helps manage about $4.7 billion at Matthews International Capital Management LLC. “You’re starting to see some life in the credit markets, but most of the leading indicators are still pointing downwards.”

The S&P/ASX 200 Index lost 1.1 percent to 3,450.20 as of 12:14 p.m. in Sydney, erasing gains earlier in the week. The index has declined 7.3 percent this year after tumbling 41 percent in 2008, the biggest annual drop in its history dating back to 1992, as the credit crisis tipped the world’s biggest economies into recession.

U.S. stocks fell yesterday, sending the Standard & Poor’s 500 Index to its biggest decline since Obama’s inauguration, while Treasuries rallied and the dollar rose on skepticism the government’s bank rescue will work. The S&P 500 Financials index in the U.S. declined the most among 10 industries, while futures on the index added 0.2 percent today.

Too Little

Geithner pledged as much as $2 trillion in government financing for programs aimed at spurring new lending and addressing banks’ toxic assets.

National Australia Bank fell 1.3 percent to A$18.51. Australia & New Zealand Banking Group Ltd., Australia’s fourth biggest lender, dropped 2.3 percent to A$12.16.

“What’s bad for the market is there’s no silver bullet,” said Robert Harrington, managing director for equity trading at UBS AG in Stamford, Connecticut. “We’re in uncharted waters and we’re trying to take steps to help the process, but there’s no guarantee as to how well it will work.”

Metals Slump

BHP declined 2.7 percent to A$32.46 after a measure of six primary metals traded in London dropped 3.3 percent. Copper fell 2.7 percent, zinc 2.4 percent and nickel 6.1 percent. Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, lost 1.9 percent to A$31.76 as crude oil fell to a three-week low, slumping 5.1 percent to $37.55 a barrel yesterday in New York. Crude traded at $37.99 a barrel as of 12:45 p.m. Sydney time.

PMP Ltd., Australia’s biggest contract printer, tumbled 15 percent to 33 cents after reporting a first-half loss of A$11 million ($7.2 million) and failing to declare a dividend.

Computershare Ltd., the world’s biggest share registrar, rallied 9.4 percent to A$7.13 after increasing its first-half dividend to 11 Australian cents, from 10 cents a year earlier. Net income fell to $130.9 million in the six months ended Dec. 31 from $154.9 million a year earlier, the Melbourne-based company said in a statement.

The following companies were among those that had unusual price changes today on the Australian stock exchange.

Emeco Holdings Ltd. (EHL AU), an Australian mining services company, soared 31 percent to 27.5 cents, a record gain. Emeco said it expects to report record net profit for the six months ending December, and that it remains well capitalized.

Lynas Corp. (LYC AU), an Australian miner of minerals used in iPod music players and liquid crystal displays, plunged 6.3 percent to 15 cents, the lowest since December 2005. The shares tumbled a record 40 percent yesterday after the company said it’s proposing to suspend work on its Rare Earths project as a result of “uncertainty” over funding.

Rio Tinto Group (RIO AU), the world’s third-largest mining company, gained 1.5 percent to A$49.70. Aluminum Corp. of China, the nation’s biggest producer of the metal, may invest as much as $20 billion in Rio to gain more access to commodities, a person with knowledge of the matter said.

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