Woolworths promotionGoty3/7.European Debt Crisis Worsens -- FEC

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Date Posted: 05:55:44 07/23/12 Mon
Author: 8/5/2007==18/52011bought some lollies for Alice from woolies
Subject:

Woolworths promotionGoty3/7.European Debt Crisis Worsens

Australia Shares Midday: Down 1.5% As European Debt Crisis Worsens
23/07/2012 1:05PM

By David Rogers

SYDNEY--The Australian share market was on track for its biggest fall in seven weeks Monday after the European debt crisis triggered a sell-off in risk assets following news that Spain's Valencia region sought government aid to repay debt, raising the possibility that Spain could require a major financial bailout.

The resources sector was leading broad-based declines, with BHP Billiton, Fortescue Metals and Oil Search down 3%-5.3% after copper, iron ore and crude oil fell 0.6%-2.5% on Friday. Woolworths rose 1.1% because of stronger-than-expected fourth-quarter sales, while Intrepid Mines slumped 52% after the precious metals explorer's minority partner halted operations at the Tujuh Bukit project in Indonesia.

At 0245 GMT, the benchmark S&P/ASX 200 was down 1.5% at 4138 on light share trading volume after hitting a three-day low of 4133. Last week, the S&P/ASX 200 rose 2.9%, its biggest weekly rise in seven months, and Thursday's 2% rise was the biggest in six months.

Recent hopes that the U.S. and China will stimulate their economies threatened to be replaced by renewed concern about the European debt crisis and frustration at the lack of major policy action from the U.S. and China.

"Fear of debt contagion in Europe has returned," said White Funds Management managing director Angus Gluskie. "Any time European bond yields rise to unsustainable levels investors will see the potential for markets to get very fearful. I think people are expecting European and U.S. markets to fall further overnight."

Asian markets suffered steep declines, with Hong Kong down 2.5%, Taiwan and South Korea down 2.2%-2.6% as investors struggled to get a handle on the dimensions of the European debt crisis and the Spanish government said Spain will remain in recession in 2013.

"Europe is definitely a drag on risk assets again this week as investors are worried that Spain's debt burden could be bigger than expected and that a full bailout may be required," said CityIndex chief market strategist Peter Esho. "However I don't think this is going to see another down leg in the Australian share market. The European Central Bank and European authorities have shown in the past six months that they are going to be quite strong in stepping in to quarantine such issues to prevent contagion."

Woolworths' fourth quarter sales rose 5.1% compared with an average of four analysts' expectations of 4%. Fourth-quarter comparable sales growth at its Australian food and liquor division, where the bulk of its earning are produced, was also better than expected at 1.3%, against the average of the four analysts' expectations of 0.5%.

"If Woolworths can drive its multi-brand, multi-format model to deliver circa 5.0% top line growth, then earnings before interest and tax growth of circa 7.0% and net profit after tax growth of circa 8.0% is possible," Macquarie analysts said in a report.

Write to David Rogers at david.rogers1@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

July 22, 2012 23:05 ET (03:05 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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