Australian shares close lower on disappointment over US rate cut

Australian shares close lower on disappointment over US rate cut - UPDATE

	Published : Wed, 12 Dec 2007 07:06 By : Agencies Print this Story

SYDNEY (Thomson Financial) - Australian shares closed sharply lower Wednesday, tracing losses on Wall Street overnight, after the Federal Reserve announced a 25-basis-point cut in interest rates when investors had been looking for a more aggressive move.

While investors had been expecting a quarter of a percent cut in the federal funds rate, they had been hoping for a 50 basis point cut in the discount rate -- the interest rate charged to commercial banks on loans from the central bank -- to relieve liquidity pressures in the troubled financial sector.

''They expected a 50-basis-point cut in the discount rate and they didn't get it. On top of that the Federal Reserve was a little bit subdued in their statement. As far as the market is concerned they should be a little more aggressive,'' said Lucinda Chan, division director at Macquarie Equities.

After falling nearly 75 points at the open, the S&P/ASX 200 recovered some ground in the afternoon session to close down 65.2 points or 1 percent at 6,615.2. The benchmark index traded between 6,579.9 and 6,654.3.

The All Ordinaries closed 62.7 points or 0.9 percent lower at 6,675.4.

Volume traded was 1.53 billion shares worth 5.92 billion Australian dollars. Decliners outnumbered gainers 754 to 478, with 369 stocks unchanged.

The S&P/ASX 200 December futures contract was down 72 points at 6,628.

The yield on the 10-year bond fell 0.1005 percentage point to 6.177 percent while the yield on 90-day bills rose 0.067 percentage point to 7.337 percent.

CommSec chief equities economist Craig James said the domestic market will recover from the shock of the Fed's interest rate decision.

''Australian shares cannot stand immune if US share markets are plummeting. But the fundamentals in our market remain rock solid, presenting longer-term investors with buying opportunities,'' James said.

The major banks were mixed, with National Australia Bank up 25 cents or 0.6 percent at 39.16 dollars and Westpac 1 cent higher at 29.61 dollars, while Commonwealth Bank dropped 24 cents or 0.4 percent to 60.54 dollars and Australia & New Zealand Banking Group shed 33 cents or 1.2 percent to 28.10 dollars.

Newly-listed financial services and stockbroking firms Austock Group and Bell Financial Group finished higher.

Austock, which listed yesterday at 1.80 dollars, closed 10 cents or 4.8 percent higher at 2.20 dollars. Bell Financial, which made its debut today, surged 36 cents or 18 percent to 2.36 dollars.

In the resources sector, Herald Resources jumped 43 cents or 23.5 percent to 2.26 dollars after receiving an all-cash offer of 2.25 dollars from Indonesia's coal giant PT Bumi Resources.

At the bigger end of the sector, Rio Tinto shed 4.50 dollars or 3.1 percent to 142.00 dollars and BHP Billiton was down 1.00 dollar or 2.3 percent at 43.20 dollars.

(1 US dollars = 1.14 Australian dollars)

allison.jackson@thomson.com

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Australian shares close lower on disappointment over US rate cut - UPDATE