Australia shares fall 0.7 pct on selling in miners, inflation

Tue Jan 21, 2014 8:13pm EST

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(Adds share moves, major events, analysis)
    SYDNEY, Jan 22 (Reuters) - Australian stocks fell 0.7
percent on Wednesday morning, as weakness in big miners offset a
slightly positive lead from Wall Street overnight and
stronger-than-anticipated inflation data prompted even more
selling. 
    Australian consumer price inflation rose by far more than
expected last quarter as the costs of food, holiday travel and
tobacco all rose, dealing a big blow to the prospects of another
cut in interest rates and sending the local dollar higher.
 
    "The underlying numbers are very high. Basically I have to
say it's uncomfortably high on a quarterly basis. In that
regard, it seems less likely (for a rate cut)," said Michael
Turner, strategist at RBC Capital Markets.
    The S&P/ASX 200 index deepened its losses after the
inflation numbers, losing 34.7 points to 5,296.8 by 0056 GMT.
The local benchmark rose 0.7 percent to reach a two-week high in
the prior session.
    Both BHP Billiton and Rio Tinto Ltd lost
1.8 percent, hit by negative sentiment in miners in general due
to subdued industrial metal prices. 
     But analysts see the dip in BHP as an opportunity to buy,
as the world's biggest miner posted strong rises in iron ore and
metallurgical coal output in the December quarter and said it
was well positioned to reward shareholders as productivity
increased. 
    "The market is missing the forest for the trees," said
Michael McCarthy, chief market strategist at CMC Markets. 
    "This is record production. BHP has pulled back on its
capital expenditure, invested  in its front operations, and
implemented cost cutting programs," he said, noting increasing
investor returns as another positive move.
    Meanwhile, a measure of Australian consumer sentiment
slipped for a second month in January as concerns about the
economic outlook and job prospects outweighed the usual seasonal
cheer of the summer holidays. 
    The big four banks mostly managed to trade in positive
territory, except a 0.7 percent loss in Commonwealth Bank of
Australia. National Australia Bank and
Australia and New Zealand Banking Group edged up 0.1
percent.
    Shares in Australia's Medusa Mining Ltd plunged 4.3
percent, after falling as much as 10 percent in the morning,
after the company ceased all mining activities at its gold mine
in the Philippines because of flooding and landslides.
    OceanaGold Corp jumped 8.2 percent after the
company said late on Tuesday its gold production for 2013 was
325,732 ounces, slightly ahead of guidance. Media also reported
the company cut 140 workers at its gold mine in New Zealand.
 
    Warrnambool Cheese and Butter Factory Co Holdings Ltd
 gained 1.1 percent after Canada's Saputo Inc 
secured majority control of the company, triggering a higher
offer price. 
    New Zealand's benchmark NZX 50 index inched up 0.3
percent to 4,935.2.
    


    

 (Reporting by Maggie Lu Yueyang; Editing by Eric Meijer)
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