Australian stocks: Market recovers from poor start

MELBOURNE - The Australian share market hit a fresh five-year low on Tuesday, but the central bank's expression of confidence in the Australian economy helped the market recover from a much poorer start.

The local bourse dropped sharply in early trading after the benchmark market index in the United States plunged more than four per cent overnight.

But investors were buoyed by comments made by the Reserve Bank of Australia (RBA) as it left the cash interest rate unchanged at 3.25 per cent.

The RBA said that while there was evidence that the Australian economy was weak, it believed recent policy actions taken by itself and the federal government would support domestic demand in the period ahead.

At the 1615 AEDT close, the benchmark S&P/ASX200 index was down 30.9 points, or 0.95 per cent, at 3,219.2 - its lowest close since December 16, 2003.

The broader All Ordinaries index lost 32.4 points, or 1.01 per cent, to 3171.4 - its lowest close since December 12, 2003.

On the Sydney Futures Exchange, the March share price index futures contract was down 38 points to 3,194 on a volume of 29,256 contracts, according to preliminary calculations.

IG Markets research analyst Ben Potter said three factors helped the local market avoid more dramatic losses today.

Mr Potter said some investors were saying that the dramatic falls in the US markets overnight were pre-empted by the sharp fall in the Australian market on Monday.

"The market also gained a fair bit from the RBA's confidence in the domestic economy," he said.

Furthermore, there appeared to be some buying support for the market around the 3217-points level.

"It's a combination of those three things really," he said.

In the resources sector, global miner BHP Billiton fell 66 cents to $27.29 and Rio Tinto sagged 21 cents to $44.02.

Oil and gas producer Woodside Petroleum dipped four cents to $34.23 and Santos reversed 25 cents to $14.75.

Among the major banks, National Australia Bank retreated 19 cents to $17.32, Commonwealth Bank dumped 22 cents to $28.29, Westpac surrendered 23 cents to $16.07, and ANZ ejected 14 cents to $12.96.

Banking and insurance group Suncorp-Metway shed 16 cents to $4.55 as Moody's Investors Service downgraded the group's ratings because of the deepening global economic downturn.

On Wall Street overnight, the the Dow Jones Industrial Average index fell 299.64 points, or 4.24 per cent, to 6,763.29 after the US government injected US$30 billion to prevent the collapse of insurance giant American International Group (AIG).

In the gold sector, Newmont was 45 cents poorer at $6.08, Newcrest jettisoned $1.96 to $31.53 and Lihir gave away 20 cents to $3.31.

The price of gold in Sydney at 1628 AEDT was US$923.30 per fine ounce, down US$29.10 on yesterday's close of US$952.40.

Telco Telstra was six cents weaker at $3.44 and Optus-owner Singapore Telecommunications firmed two cents to $2.53.

Retailer Woolworths improved 57 cents to $26.82 and Wesfarmers, which owns Coles, descended eight cents to $17.62.

In the media sector, News Corp was down eight cents to $9.76 and its non-voting stock sagged nine cents to $8.55.

Consolidated Media scraped off 0.5 cents to $1.95 and Fairfax eased one cent to 87 cents.

The top-traded stock by volume was drilling services provider Boart Longyear, with 162.98 million shares worth $12.25 million changing hands.

Boart shares were steady at 7.6 cents.

Preliminary national turnover was $1.35 billion shares worth $3.29 billion, with 667 stocks down, 246 up and 282 unchanged.

- AAP