Sydney, Oct 21, 2008 AEST (ABN Newswire) - Overnight US stocks rallied and commodity gained after the Federal Reserve's chairman backed more government spending to help the economy and credit market conditions showed further signs of improvement.
Yesterday Australian shares spiked in the final minutes of trading to end at their high for the day as stronger commodity prices gave investors fresh hope for miners and energy producers. Analysts say it is a sign of recovery while the market has been long waiting for some good news.
On Monday, the Australian share market shunned a weaker Wall Street to close 4% higher on stronger resource and banking stocks.
The benchmark S&P/ASX200 index was up 171.5 points, or 4.3%, at 4142.3, while the broader All Ordinaries added 157.9 points, or 3.9%, at 4098.7.
At 0708 AEDT, the December Share Price Index futures contract on the Sydney Futures Exchange was up 130 points, or about 3.1%, at 4,288.
Today the Australian dollar has opened higher, breaking through $US0.7000, as US Federal Reserve chairman Ben Bernanke asked congress to consider a second stimulus package to help "promote economic growth and job creation". At 7am, the Australian dollar was trading at $US0.7038/43, up from yesterday's close of $US0.6993/96.
Crude oil surged more than two dollars Monday on growing signs that OPEC will announce production cuts at a meeting this week in a bid to shore up falling prices amid a global financial crisis. New York's main contract, light sweet crude for delivery in November, jumped $US2.40 to close at $US74.25 a barrel.
Key Economic Facts and Figures
Australia's international merchandise imports rose to A$21 billion in September, from a revised A$18.416 billion in August, the Australian Bureau of Statistics said on Monday. Merchandise imports into Australia rose 8.0 per cent in September in seasonally adjusted terms.
Reserve Bank governor Glenn Stevens is warning the Rudd Government its blanket guarantee of deposits is creating serious dislocation in the entire financial system and must be changed. The main problem is that so much money, particularly short-term money, is rushing out of any institution or security or cash management trust that is not guaranteed and being put into deposits that are. RBA wants the Government to urgently announce a dollar cap to the guarantee to prevent the situation from becoming worse.
The RBA releases minutes from its October 7 board meeting, detailing the thinking behind its decision to slash its key interest rate by 1 percentage point to 6%.
M&A News
Leighton Holdings Ltd. (ASX:LEI), Australia's largest construction company, said Tuesday it sold 95.6 million units in ConnectEast Group (ASX:CEU). Leighton in March acquired A$260 million in ConnectEast stapled units at A$1.15 each to replace a bridging facility when construction was completed.
Dai-ichi Mutual Life Insurance Co. completed acquiring a nearly one-third stake in Tower Australia Group Ltd.( ASX:TAL), becoming the Australian life insurer's major shareholder. Last August Dai-ichi Life agreed to buy 29.7% stake in Tower Australia from British investment company Guinness Peat Group for A$376.3 million.
Important Corporate News
Scimitar Resources(ASX:SIM) yesterday announced it had signed the deal with a South Korean consortium including subsidiaries of Daewoo(SEO:047050) and LG(SEO:003550) as well as Korean Government company Korea Resources Corporation. The Korean consortium will spend up to A$6.2 million over three years to search for uranium across four exploration licences at Scimitar's Marree project, 550km north of Adelaide. The deal is subject to Foreign Investment Review Board and Korean Government approval.
Commonwealth Bank of Australia (ASX:CBA) will reduce its standard variable rate home loan by 21 basis points to 8.32 per cent, and its basic variable home loan to 7.81 per cent, the bank said in a statement. The new rates apply to both new and existing customers and will take effect from Thursday October 30.
Optus is set to announce a significant number of job cuts from its senior and middle management. The majority of cuts will come in middle and senior management roles in Sydney, plus a handful of positions in Brisbane and Melbourne.
National Australia Bank Ltd (ASX:NAB) has reported a fall in annual profit, but it also said it was well placed to weather the financial storm. NAB reported a 0.9 per cent fall in reported net profit for fiscal 2008 to A$4.536 billion, compared to the previous corresponding year. Its cash earnings fell 10.7 per cent to A$3.9 billion, which was in line with its forecast.
Contact
Michelle Liang
Asia Business News Asia Bureau
Tel: +61-2-9247-4344
Email: michelle.Liang@abnnewswire.net
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