Bank funding pressures continue to rise, RBA says: Midday Roundup

The Reserve Bank has confirmed major financial institutions are seeing the cost of borrowing rise after the turmoil in the Eurozone.

Assistant governor Guy Debelle has confirmed the major banks are all facing higher costs due to the crisis, which caused the big four to raise mortgage rates this past week.

“This global repricing of bank debt has clearly affected the Australian banks wholesale funding costs,” he said in a speech in Sydney. “Investors are demanding much higher compensation for bank credit risk now than they were in mid-2011.”

However, Debelle also said wholesale borrowing costs had fallen, and noted that Europe appears to have escape the worst-case scenario for now.

“So far this year, that has been a more positive story than it was at the end of the last year,” Debelle said.

“Whether this happier state of affairs persists is difficult to tell,” he said. “There have been outbreaks of optimism over the past couple of years which were dashed.”

Moody’s cuts debt ratings of European nations

Ratings agency Moody’s has cut the debt ratings of six European countries, including Portugal, Spain and Italy.

It has also cut its outlook on the UK and France’s AAA rating to negative.

The company said that uncertainty over the euro area’s prospects for institutional reform of its fiscal and economic framework were part of its decision.

It also cited Europe’s “increasingly weak macroeconomic prospects, which threaten the implementation of domestic austerity programs and structural reforms needed to promote competitiveness.”

Shares fall after Greece agrees to debt deal

The Australian sharemarket has fallen slightly this morning after Greece agreed to a new debt deal that would help erase the country’s debt – a move that has sparked violent riots throughout Athens.

The benchmark S&P/ASX200 index was down 12.3 points or 0.3% to 4272.8 at 12.00 AEST, while the Australian dollar has moved higher to $US1.07c.

In the United Sates, the Dow Jones Industrial Average rose 72 points or 0.6% to 12,874.

Greece agrees to new debt deal

The Greek Parliament voted in favour of new austerity measures last night, backed by the European Union and the International Monetary Fund.

The austerity measures were to be passed if the country was to receive a bailout worth $161 billion.

While news of the deal has bolstered hopes the European financial crisis may be coming to an eventual close, the development has caused widespread riots in Greece.

GWA profit falls 60% in first half

Building fixtures company GWA Group has recorded a 60% decline in first half profit due to lower building activity.

The company said net profit was $13.3 million, down from the $33 million recorded during the previous corresponding period.

“The half has been successful in terms of finalising the sale of non-core businesses, which will allow us to focus on the Australian building fixtures and fittings sector,” GWA Group managing director Peter Crowley said in a statement.