Shares surge on Wall Street lead, American Express cuts 4000 jobs, Sol Trujillo leaves early: Economy roundup

The Australian sharemarket has opened 1.9% higher after positive results from Wall Street, and comments from RBA Governor Glenn Stevens about the state of the economy. The benchmark S&P/ASX200 index was up 78.5 points or 2.1% to 3814.1 at 11.40 AEST. The dollar also opened higher to US76 cents. Commonwealth Bank shares jumped […]

Patrick Stafford 19 May, 2009

The Australian sharemarket has opened 1.9% higher after positive results from Wall Street, and comments from RBA Governor Glenn Stevens about the state of the economy.

The benchmark S&P/ASX200 index was up 78.5 points or 2.1% to 3814.1 at 11.40 AEST. The dollar also opened higher to US76 cents.

Commonwealth Bank shares jumped 2.2% to $36.28, with ANZ also lifting 1.3% to $15.50. Westpac lifted 2.3% to $19.96, with NAB also rising 1.6% to $21.81.

Overseas, Wall Street recorded positive results after home improvement retailer Lowe’s announced better-than-expected results. The Dow Jones Industrial Average closed up 235.44 points or 2.85% to 8504.08.

But the news wasn’t all good in the US, with credit card company American Express announcing plans to scrap 4000 jobs; about 6% of its total workforce.

The company is attempting to save about $1.07 billion through the rest of the year, but has been hurt by the number of customers struggling to pay back credit card debt. The company last week said the amount of debt it does not expect to be repaid jumped to 10.1% in April from 8.8% the previous month.

“We continue to be very cautious about the economic outlook,” chief executive Kenneth Chenault said in a statement.

Also in the US, the official accounting authority, the Financial Accounting Standards Board, has moved to introduce new rules that will force financial groups to accommodate toxic assets on to balance sheets.

The new rules will begin at the start of 2010, but experts in the US have said the new rules will force major institutions to seek more capital raising initiatives.

Back home, Telstra announced that David Thodey has taken over the chief executive role from Sol Trujillo, who has left for the US over a month earlier than planned.

“Mr Trujillo had agreed to stay with Telstra until 30 June, but the appointment of an internal candidate as the new CEO meant a smooth and swift transition was possible,” Telstra said in a statement on Monday.

Nerida Caesar will replace Thodey as general managing director of Telstra enterprise and government from 9 June.

Meanwhile, Prime Minster Kevin Rudd has announced that the country’s debt will reach $300 billion.

During an appearance on ABC television, Rudd said that the estimated public debt would reach 13.8% of GDP, or about $300 billion, but said it was appropriate to spend to stimulate the economy.