Not sure what cause the move downward but it might have something to do with this article and must admit didn't expect we would went so high this morning.
Australian Company Profits Unexpectedly Drop 2.1% (Update1)
By Jacob Greber and Victoria Batchelor
Dec. 3 (Bloomberg) -- Australian company profits unexpectedly declined in the third quarter for the first time in more than two years.
Gross operating profits dropped 2.1 percent from the second quarter, the Bureau of Statistics said in Sydney today. That compared the median estimate of a 2 percent increase in a Bloomberg News survey of 25 economists.
The Australian dollar's 12 percent surge against the U.S. currency this year is eroding revenue from exports, which account for 20 percent of the A$1 trillion economy. The nation's worst drought has also slashed crop production, causing companies including GrainCorp Ltd. to post losses, while a slump in the U.S. housing market has curbed earnings for James Hardie Industries NV and other Australian businesses that sell products in the world's largest economy.
``While the fundamentals of the economy are quite good, the stronger Australian dollar is providing a revenue hit,'' Peter Pontikis, treasury strategist at Suncorp-Metway Ltd., said before the report was released. ``Most people on the export side say they can't make money with the Aussie dollar at 90 U.S. cents.''
The Australian dollar surged last month to a 23-year high of 93.72 U.S. cents after the nation's Reserve Bank raised borrowing costs to curb higher inflation.
The currency bought 88.26 U.S. cents at 11:40 a.m. in Sydney from 88.33 cents immediately before the report. The yield on the benchmark 10-year government bond fell 1 basis point to 5.97 percent. A basis point is 0.01 percentage point.
Inventories Rise
The decline in company profits may also be a sign that rising fuel, raw material and labor costs have eaten into profits. Crude oil has surged about 50 percent this year, increasing transport and manufacturing costs.
Inventories held by companies rose 1.3 percent in the third quarter from the previous three months, today's report showed. Economists had estimated a 0.5 percent gain.
James Hardie, the biggest seller of home siding in the U.S., said second-quarter earnings fell 32 percent amid a slowdown in residential construction.
The Sydney-based company's earnings excluding asbestos- compensation costs fell to $46.5 million in the three months ended Sept. 30.
Chief Executive Officer Louis Gries said he doesn't expect the U.S. housing market to recover until at least March as the collapse of subprime lenders and tighter credit cuts demand for new homes.
GrainCorp, eastern Australia's largest grain handler, reported a loss of A$19.8 million ($18 million) in the year ended Sept. 30 and on Nov. 29 forecast another loss this fiscal year.
Drought slashed the nation's last wheat harvest to a 12-year low, reducing supplies for export. AWB Ltd., Australia's largest wheat exporter, said in November that profit plunged 53 percent in the year ended Sept. 30.
Gross operating profit measures earnings before tax, interest, depreciation and amortization. It excludes asset sales and foreign exchange gains or losses.
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