Labor win sparks stock market bounce

MELBOURNE - The Australian share market finished flat after rebounding from lows after news the Labor Party would be returned to power.

The benchmark S&P/ASX200 index yesterday closed down 2.3 points, or 0.05 per cent, at 4573.2 points, with big miners losing ground.

The bourse dipped after two independent MPs, whose votes were crucial to determining which parties would form power, said they would back Labor. Shortly afterwards the All Ordinaries and S&P/ASX200 rebounded.

Austock Securities senior client adviser Michael Heffernan said the market was initially unhappy with the Independents' decision but then backed the move.

"Watching the market as the revelations unfolded, as it progressed, the market dropped a bit at the start but then it picked up," Mr Heffernan said.

"What the market is happy about is that there is going to be a lot more discussion in this parliament about various issues than there was in the past.

"When [Rob] Oakeshott was talking there was a pretty clear indication that was going to take place, so we may not see anything like the peremptory mining tax for example, implemented."

The election result means Julia Gillard will pursue a tax on mining companies, sending BHP Billiton down 11c at A$38.44 and Rio Tinto losing 65c at A$74.35.

The Australian dollar fell after the central bank kept the benchmark interest rate unchanged at 4.5 per cent for a fourth month yesterday, saying the global economic outlook remains uncertain.

The currency also declined versus the New Zealand dollar for a fourth day after the Gillard victory.

"The RBA is clearly in no hurry before the next inflation rate, which comes in October, and that's a negative for the Australian dollar," said Katie Dean, a senior economist at Australia & New Zealand Banking Group in Melbourne.


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