Reuters: Hot Stocks: Strong currency douses Australia share rally

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Strong currency douses Australia share rally Dec 13th 2012, 07:01 Thu Dec 13, 2012 2:01am EST MELBOURNE, Dec 13 (Reuters) - A five-day rally in Australian shares stalled on Thursday, with the index ending just one point below the 17-month closing high posted a day earlier as investors turned cautious over effect a strong Australian dollar was having on exporters. Top miner BHP Billiton still managed its best close in 7-1/2 months, gaining 0.7 percent to A$36, as iron ore prices rose to their highest since July. The broader upside for stocks was stifled by the Australian dollar's advance to a three-month peak, along with concerns at the lack of progress in U.S. budget talks between Democrats and Republicans over ways to reduce the deficit. Failure to reach a compromise would drive the United States over a "fiscal cliff", $600 billion of tax hikes and spending cuts scheduled to start from January, and could tip the world's largest economy into recession. "Most people still think 'How can they be so stupid as to give themselves a recession that they don't want to have, don't need to have?' and therefore something will be done at five minutes to midnight so that it doesn't happen," said Saul Eslake, economist at Merrill Lynch Bank of America. "But with each day that goes by ... that continues to be a worry." Eslake added that observers were "troubled by the number of people on both side of politics who think that going over the cliff is a legitimate option." In Australia, investors are looking for a pick-up in the non-mining parts of the economy to compensate for lower spending slated for resource projects. "The big issue for 2013 is whether there will be a smooth and orderly transition from growth led by resources investment to growth led by something else once we pass the peak of the mining investment boom," Eslake said. The benchmark S&P/ASX 200 index shed 1 point, the first decline in five days, to end at 4,582.8, according to the latest data. The index hit an intraday high of 4,603.5 on Wednesday and closed at a 17-month high. New Zealand's benchmark NZX 50 index fell 0.5 percent to 3,974.7. Media shares rallied, led by a gain of 11 percent to A$0.54 in Fairfax Media after Commonwealth Bank of Australia analysts upgraded the stock to "Overweight" and put a target price of A$0.59. APN News and Media gained 10.5 percent, to A$0.315. Iluka Resources Ltd sank 6 percent to A$8.16 after it said zircon and synthetic rutile volumes are near the bottom end of advised ranges, and market conditions for its mineral sands products remained challenging. Linc Energy retreated 20 percent to A$1.035, unwinding after two days of steep gains on the back of speculation that Russian billionaire Roman Abramovich was interested in the company. On Wednesday Linc said it was unable to explain the jump since it closed at 81 cents on Friday December 7. (Reporting by Miranda Maxwell; Editing by Simon Cameron-Moore) Link this Share this Digg this Email Reprints

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