Sydney, Oct 8, 2008 AEST (ABN Newswire) - Overnight Wall Street closed more than 5% down on growing fears that the spiralling credit crisis would drag the US economy into a recession. While the global financial crisis deepened, RBA cut the interest rate by a full percentage point, double the amount that had been expected.
The Australian dollar has opened weaker for the eleventh straight session, losing two US cents overnight as fears about a global slowdown hit commodities-driven currencies. At 7am, the Australian dollar was trading at $US0.7053/62, down sharply from yesterday's close of $US0.7268/75. While gold and oil prices improved overnight, commodity currencies still faced selling pressure as large falls in base metals prices during the past fortnight reminded traders that global growth was under threat.
Yesterday crude oil rebounded, halting a 13% decline in the past four days, amid speculation OPEC will curb output because of falling prices. New York's main contract, light sweet crude for delivery in November, climbed $US2.25 to close at $US90.06 a barrel on Tuesday.
In early trade, the benchmark S&P/ASX 200 index had fallen as much as 3.9%, or 178.4 points, to 4440.3. The December Share Price Index futures contract on the Sydney Futures Exchange was down 266 points at 4,422.
Key Economic Facts and Figures
The Reserve Bank of Australia (RBA) cut its key rate to six per cent from seven per cent, its biggest cut in over 16 years. Westpac(ASX:WBC) and Commonwealth Bank(ASX:CBA) announced lower their variable home loan rate by 80 basis points, passing on most but not RBAs entire official rate cut. RBA governor Glenn Stevens said a bigger than usual rate cut was needed to bring down borrowing costs and help Australia weather a downturn in the global economy. Economists expect a further rate cut around Christmas.
The Westpac/Melbourne Institute index of consumer sentiment for October and the Australian Bureau of Statistics housing finance data for August will be released.
M&A News
Commonwealth Bank of Australia(ASX:CBA) has agreed to acquire British bank HBOS' Australian unit BankWest for A$2.1 billion. As part of the acquisitions, Commonwealth Bank plans a A$2 billion institutional share placement. The bank said the acquisition of BankWest provided a significant opportunity to further develop the group's business in the Western Australian market.
Metals recycling giant Sims Group Ltd(ASX:SGM) has acquired United States electronics component scrap recycler Global Investment Recovery Inc (GIR) for an unknown sum. Sims declined to disclose the purchase price, saying the acquisition will increase Sims's North American electronics recycling and asset recovery market presence by approximately 40 per cent, consolidating its market leading position.
Nexus Energy (ASX:NXS) yesterday announced that Mitsui's(TYO:8031) Australian arm had abandoned a deal that would have seen the former sell a 25 percent stake in its Crux liquids project for US$255 million because of the global financial turmoil. Nexus said it had now appointed Deutsche Bank to find another partner.
Leighton Properties is planning to put in an offer on the Capital Square site that went on the market this week. The company had been in discussions with the site owners, Saville Australia and Babcock & Brown(ASX:BNB), about taking a stake to retain interest in developing the site.
Important Corporate News
The home entertainment and gadget retailer JB Hi-Fi(ASX:JBH) said the company's profit margins "remain solid" and costs were under control and both sales and earnings in July and August were "well up on the previous year". Analysts believe the company will post a profit of A$129 million this year, an increase of 26 per cent.
The Seven Network(ASX:SEV) will once more ask its shareholders for approval to sell out of its 47 per cent stake in the Seven Media Group -- which owns the company's flagship magazine and television assets.
Contact
Michelle Liang
Asia Business News Aisa Bureau
Tel: +61-2-9247-4344
Email: michelle.Liang@abnnewswire.net
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