The Australian sharemarket has slumped over 80 points this morning following shocking leads on Wall Street, where stocks dropped over 200 points with renewed fears over debt problems in Greece.
Local investors grew pessimistic after Wall Street trading, with fear spreading that debt problems could reach far beyond Europe, even with the latest bailout package spearheaded by the International Monetary Fund and the European Union.
The benchmark S&P/ASX200 index was down 90 points or 1.92% to 4646.1 at 12.15 AEST, while the Australian dollar also fell on the news to US90c.
Most major shares have suffered drops, with ANZ falling 1.5% to $24.29, while Commonwealth Bank shares dropped 1.9% to $57.23. NAB lost 2% to $27.16 as Westpac lost 3% to $26.50.
In the United States, exporters to Europe suffered major losses with Hewlett-Packard losing 3.9% and Caterpillar dropping 4.6%. The Dow Jones Industrial Average plummeted a shocking 225.06 points or 2.02% to 10,926.77.
New data showing pending home sales at a five-month high did nothing to save the market.
Also in the United States, News Corp has recorded a profit decline for the third quarter from $US2.7 billion to $US839 million from the previous corresponding period, with 21st Century Fox’s blockbuster hit Avatar shoring up results.
The result was actually above market expectations, with chief executive Rupert Murdoch saying it proves “no content company is stronger than News Corporation at building both fiscal and operational momentum”.
“Our global portfolio of sought-after content is ideally situated to benefit from the increase in consumer spending, advertising and access to new platforms we are seeing across our regions,” he said.
Revenue rose by 19% to $US8.8 billion, with Murdoch praising the “unique strengths” of News Corp’s cable television channels, which generated nearly half the company’s operating profit.
Westpac records first-half profit of $2.98 billion
Back home, Westpac has recorded a 30% increase in cash earnings for the first half of the 2010 financial year, with a cash profit of $2.98 billion for the six months to March 31, up from $2.29 billion in the previous corresponding period.
Statutory net profit rose by 32% to $2.88 billion, with revenue also climbing 6.1% to $8.58 billion.
“The recent period has seen a key turning point for the Australian banking system, with the improved economic environment leading to a stabilisation in asset quality and a material reduction in impairment charges,” Westpac chief executive Gail Kelly said in a statement.
“Total system credit demand is expected to improve as business investment gradually returns, with mortgages likely to remain solid.”
The announcement comes after the big four banks passed on the Reserve Bank of Australia interest rate rise yesterday, with Commonwealth Bank the first to make a move, lifting its standard variable rate to 7.36%.
ANZ followed with a variable rate of 7.41%, while NAB pushed its rate up to 7.24%. Currently Westpac is the highest with a rate of 7.51%.
According to the latest figures from the Australian Bureau of Statistics, dwelling unit approvals rose by 15.3% in March following declines in the two previous months.
Private sector house approvals rose 0.5%, with other dwelling approvals rising 59.9%. The total value of buildings approved rose 4.8%, while the value of new residential building increased by 6.7%.
Meanwhile, activity in the services sector expanded for the first time in five months in April as business conditions have improved.
Services sector improves during April
The Australian Industry Group-Commonwealth Bank performance of services index increased by 3.4 points in April to 52.3, above the 50-point mark separating expansion from contraction.
“The April services sector pick-up is encouraging after the weak start to the year,” AIG chief executive Heather Ridout said in a statement.
“The run of interest rate increases starting in October last year is clearly impacting on these sectors and yesterday’s rate rise will not be welcomed as it will further dampen activity,” Ridout said.
Rio Tinto managing director David Peever has expressed concern over the Government’s 40% super profits tax flagged during the Henry Review response over the weekend, saying it would make the resources sector the highest taxed in the world.
“We are concerned about the inclusion of existing operations and the apparently arbitrary way the new resources tax was set at 40%,” he said in a statement.
“Taxing 40% of profits over the long-term bond rate, together with corporation tax, would make the Australian minerals sector the highest taxed in the world, seriously eroding competitiveness.”
“Altering the rules for existing multi-billion dollar projects in mid-stream – after large amounts of capital have already been put at risk over many years – would be the worst possible message Australia could send to investors.”
Lihir Gold has said it will continue to scour the market for alternative acquisition bids despite endorsing a $9.5 billion offer from Newcrest Mining.
“That exercise produced encouraging results and is continuing,” chairman Ross Garnaut said at the company’s annual general meeting. “Having begun that process, it should run its course, and we have agreed that approach with Newcrest.”
As reported by the Australian Financial Review, the Federal Government has struck a deal with the Australian pharmaceutical industry that will save it $2 billion over the next four years.
It is understood health minister Nicola Rixon will announce the agreement next week, which will see drug manufacturers accept a 21% increase in paid drug prices with the Government to cease introducing more therapeutic groups.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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