Rudd's $42bn stimulus package boosts stocks

LOCAL shares and the dollar bounced yesterday as Kevin Rudd unveiled a $42 billion stimulus package and rates hit a 45-year low. Major banks underpinned the recovery in the S&P/ASX 200 after the Commonwealth Bank announced a surprise profit upgrade on Monday night. After surging more than 2 per cent in the morning, the benchmark S&P/ASX 200 index finished higher by 11.3 points, or 0.3 per cent, to 3508.7. The All Ordinaries was up 5.6 points to 3449.1. IG Markets research analyst Ben Potter said shares yesterday trimmed early gains as investors bought the rumour in the morning and sold the fact in the afternoon. Shares also drifted in the afternoon after the federal Government announced a second stimulus package worth $42 billion and the Reserve Bank slashed rates to a 45-year low. Mr Potter said investors knew it would take time for the government measures to reach the real economy. "The package might help the economy (delay) the onset of a technical recession, but looking further out, it looks like a matter of when and not if." CBA led the gains, soaring 9.8 per cent to $29.05 on its guidance that first-half profit would come in 20 per cent above the consensus forecast. Westpac rose 7.1 per cent to $16.40 after becoming the first bank to pass on the RBA's rate cut to its customers. NAB rose 4.5 per cent to $19.55, and ANZ lifted 3.3 per cent to $13.70. The miners were mixed, with Rio Tinto up 2.4 per cent to $45.53, and BHP Billiton down 0.7 per cent to $29.78. Rio confirmed on Monday that it was in talks to sell minority project stakes to Chinese aluminium giant Chinaclo and said it would issue convertible notes. Alumina, minority partner of the Alcoa World Alumina & Chemicals group, fell 3.7 per cent to $1.04 after delivering a 61.5 per cent drop in full-year profit due to falling demand and prices. It also said it would not pay a final dividend to conserve cash. Oil and gas producer Woodside Petroleum lost 41c to $34.94, and Santos rose 33c to $14.52. Among gold stocks, Newcrest dropped $1 to $30 after raising more than expected from its $750 million share placement following strong demand from domestic and international investors. Lihir fell 7c to $3.08 and Newmont fell 14c to $6.25. The price of gold in Sydney was $US901.70 per fine ounce, down $US12.20 on Monday's close of $US913.90. Shares in fertiliser and explosives maker Incitec Pivot plunged 78c, or 30.5 per cent, to $1.78 when it said the global economic downturn may cut earnings in fiscal 2009 by about one third. Westfield Group securities were placed in a trading halt as it raises $2.9 billion through a securities placement. Qantas shares were also placed in a halt, amid speculation the national carrier would announce a $500 million equity raising. National turnover was 1.33 billion shares worth $4.09 billion, with 353 stocks up, 490 down and 323 unchanged. --theaustralian.news.com.au