Sydney, Jan 21, 2009 AEST (ABN Newswire) - US stocks plunged overnight on renewed fears of a deeper recession and the bleak news of British based Royal Bank of Scotland had bombarded the banking industry. Analysts said Barack Obama's honeymoon period might already be over.

Yesterday the Australian stock market slumped more than 3% with the negative lead from UK. The benchmark S&P/ASX200 index ended 112.7 points, or 3.1%, lower at 3,476.6, the lowest level in two months, while the broader All Ordinaries lost 106 points, or 3%, to 3,425.

At 0830 AEDT on the Sydney Futures Exchange, the March Share Price Index futures contract was down 92 points at 3,370.

The dollar opened at a six-week low, shedding more than one US cent, as plunging profits at a US financial giant overwhelmed the enthusiasm surrounding US President Barack Obama's inauguration. At 7am AEDT, the dollar was trading at $US0.6480/84, down 1.88 per cent from yesterday's close of $US0.6603/08, marking the weakest session start since December 8.

Light, sweet crude for February delivery rose $US2.23 to settle at $US38.74 per barrel on the New York Mercantile Exchange.

Key Economic Facts and Figures

Figures released yesterday showed an worsening industry slowdown amid warnings that airlines have yet to reach a low point in the downward trends. Passenger numbers on Qantas(ASX:QAN) international flights fell 8.4 per cent on a year ago, domestic flights dropped 7.4 per cent and Qantaslink services carried 8.3 per cent fewer passengers. Low-cost Jetstar, by comparison, continued to attract more passengers with an 11 per cent year-on-year increase on domestic routes and a 5.6 per cent rise on international services. Macquarie Airports(ASX:MAP) revealed traffic falls across its portfolio in December, with its European properties particularly hard hit.

Today Westpac and the Melbourne Institute will release their Survey of Consumer Sentiment for January.

M&A News

AGL Energy Ltd. (ASX:AGK) yesterday announced it would invest A$25 million for stakes in two petroleum exploration licences majority held by Innamincka Petroleum(ASX:INP), on the border of Queensland and South Australia.

The Queensland coking coalminer Caledon Resources(ASX:CCD) admitted it was in takeover talks with a number of parties. Industry observers have anticipated China be one of the buyers with interest in Australia's resources.

Important Corporate News

BHP Billiton(ASX:BHP) will suspend the Ravensthorpe nickel mine in Western Australia after a fall in the price of the metal. The company plans to also reduce the rate of production at its Mount Keith nickel mine near Kalgoorlie in WA.

It is believed that OZ Minerals(ASX:OZL) and its lenders were close to sealing a crucial bridging loan of about A$100 million today to help OZ Minerals finish constructing its A$1.15 billion Prominent Hill copper and gold mine in South Australia.

Origin Energy's(ASX:ORG) profits are set to take a hit after its New Zealand based subsidiary, Contact Energy(NZE:CEN), warned earnings would slump by up to 23 per cent this financial year.

A JP Morgan note warns it is "increasingly likely" the building and construction group Boral(ASX:BLD) could be forced to write down the value of its US assets by as much as A$300 million, or a third, a move the broker said could result in a breach of the covenants covering Boral's corporate debt facility.

David Jones(ASX:DJS) will cut 150 jobs from head office and administration, after it cut its profit growth and sales forecasts.

Drug distributor and pharmacy retailer Australian Pharmaceutical Industries(ASX:API) says it is on track to improve its first-half profit after positive Christmas trading. Comparable store growth across the group was approximately 4 per cent during the time.

Country Road(ASX:CTY) expects profit before tax to increase by 70-80 per cent in 2009 after sales rose at the clothing retailer. Profit before tax for the 6 months to December 31 would be between A$13.6 - A$14.4 million, compared with A$8 million in that period the year before.

Iluka Resources(ASX:ILU) has reported an increase in total mineral sales in 2008 despite posting a fall in production. Iluka also reaffirmed its 2009 production outlook.


Michelle Liang
Asia Business News Asia Bureau
Tel: +61-2-9247-4344

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