Sydney, Sep 19, 2008 AEST (ABN Newswire) - The US Federal Reserve's bailout of insurance giant American International Group (AIG) did little to ease the concerns of investors worldwide, Asian markets were deeply in the red, with Hong Kong's bourse down about seven per cent. The Australia share market took another massive beating yesterday.
The benchmark S&P/ASX200 lost 114.9 points or 2.43% at 4607.27, while the broader All Ordinaries fell 117.8 points, or 2.47% to 4,651.89.
Overnight Wall Street closed higher on reports the federal government may create an entity that will take over banks' bad debt.
Analysts says rumours Morgan Stanley is in merger talks with Wachovia, America's fourth largest bank, combined with concerns Lloyd's TSB's take over Britain's HBOS (Halifax Bank of Scotland), are weighing on investors' minds.
At 6.52am, the Sydney Futures Exchange's December Share Price Index contract was 133 points higher at 4800.
Aussie dollar opened stronger today. At 7am AEST, the dollar was trading at $US0.8045/50, up from yesterday's close of $US0.7986/90.
Concerns over deepening turmoil in the US financial system pushed oil prices above $US100 a barrel again as investors turned away from equities in favour of commodities. Earlier, the contract topped $100 a barrel again as investors uneasy about the worsening financial crisis flocked to commodities as a safe haven.
Key Economic Facts and Figures
Australia's central bank pumped extra cash into the banking system for a fourth day on Thursday, bringing its injection this week to A$11.2 billion ($8.8 billion), as it sought to ease funding pressures amid the global credit rout.
The Reserve Bank is set to cut interest rates in October and November to stimulate the slowing economy and protect Australia from the global financial market fallout. But this week's turmoil of Wall St will spark off the Australian banks more unlikely to pass on the benefits of future interest rate cuts to customers, as concerns for the deteriorating global financial markets grow. Economists are also tipping a further two rate cuts over the coming 12 months.
Today National Australia Bank and the Australian Securities and Investments Commission (ASIC) appear before the House of Representatives economics committee inquiry into banking competition.
M&A News
Copper and gold miner Straits Resources Ltd(ASX:SRL) will not proceed with a planned de-merger of its subsidiary Straits Asia Resources Ltd due to current market volatility. Straits Resources had planned to de-merge its 47 per cent held subsidiary, coal miner Straits Asia Resources Ltd, by mid-October, leaving the parent entity to focus on metals production.
Macmahon Holdings(ASX:MAH) has effectively abandoned its hostile takeover bid for Ausdrill(ASX:ASL) as institutional investors and hedge funds withdrew acceptances at an increasing rate. Macmahon said it would not withdraw its 50 per cent condition, a figure unlikely to be reached before Monday's deadline. The Ausdrill board rejected two share offers from Macmahon.
Important Corporate News
Suncorp-Metway Ltd(ASX:SUN) has reconfirmed its earnings guidance for this financial year, despite the challenges posed by volatile financial markets. Suncorp said it was on target to achieve its funding requirements for 2008/099 and had successfully undertaken over A$1 billion in private placements in the term debt market. At its 2007/08 results announcement in August, Suncorp forecast its banking arm to grow profit before tax and bad debts in the high single digits in the year to June 30, 2009.
St George(ASX:SGB) says from Monday September 22 it will cut 0.15 percentage points from its one-year introductory fixed rate, which has been cut to 8.54 per cent, while the non-introductory rate for the same term has been lowered by a quarter of a percentage points - also to 8.54 per cent.
Telstra(ASX:TLS) has formed a new business unit to focus on online and mobile content as it heads towards its vision of becoming a so-called "media-comms" company. Telstra announced the new unit yesterday, along with 800 job cuts.
BHP Billiton (ASX:BHP) has signed an important 10-year iron ore supply deal with BlueScope Steel(ASX:BSL) less than two weeks before the Australian Competition and Consumer Commission is expected to rule on the miner's proposed acquisition of Rio Tinto(ASX:RIO). The agreement between BHP and BlueScope announced yesterday means the steelmaker has a guaranteed source of iron ore supply until June 2019. This could make it easier for BHP to gain the competition regulator's approval for its Rio bid.
Contact
Michelle Liang
Asia Business News Asia Bureau
TEL: +61-2-9247-4344
EMAIL: michelle.liang@abnnewswire.net
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