Sydney, Nov 7, 2008 AEST (ABN Newswire) - Overnight US stocks plummeted for a second day with a 4.85% drop as global markets plunged on fears of a deep worldwide recession. Yesterday the 150 basis points interest rate cut of Britain also surprised the market. Economists and analysts questioned the need for such a big cut and believe the economy must be in seriously risk with more dangers ahead. Investors ignored big interest rate cuts in Europe to send markets into steep falls overnight. The key Asian indicators also dropped more than 6.5 percent and wiping out much of the previous rally that had preceded the presidential election in the United States.
The Australia market may not immune from the fall as investors are concerning the worsening global economy will drag Australia down. Yesterday, the benchmark S&P/ASX200 index slumped 186.9 points, or 4.3%, to close at 4,149.7 while the broader All Ordinaries index declined 180.8 points, or 4.2%, to 4,106.5.
In recent trading, the December Share Price Index futures contract on the Sydney Futures Exchange was down 164 points, or about 3.9%, to 4051 points.
The Australian dollar was marginally weaker as investors lowered their exposure to higher risk assets. At 0700 AEDT, the Australian dollar was trading at $US0.6704/10, down from Thursday's close of $US0.6728/33.
Oil prices on Thursday tumbled under $US58 a barrel, reaching the lowest level for nearly 21 months as recession fears gripped markets. On the New York Mercantile Exchange light sweet crude for December fell dropped $US3.80 to $US61.50 a barrel.
Key Economic Facts and Figures
The latest International Monetary Fund (IMF) update has tipped Australian growth at 1.8 per cent for the next year. The IMF projects global growth at 3.7 per cent in 2008 and 2.2 per cent in 2009.
Australia's jobless rate in October stayed at 4.3% seasonally adjusted, the same as in the previous month despite an increase in the number of people employed, data from the Australian Bureau of Statistics showed Thursday. Employment in October has increased by 34,300 to 10.768 million.
The Australian Industry Group-Housing Industry Association released Performance of Construction Index, which reached 36.4 points in October, indicating a slight improvement in activity from the previous month, when the index sank to 31.8. A reading below 50 points indicates a contraction in building activity, showing a significant slowdown in Australian economic growth.
M&A News
The US brewing major Molson Coors(NYSE:TAP) yesterday declared it had taken a 5.3 percent stake in Foster's Group(ASX:FGL). Analysts said Molson was unlikely to make a further move until Foster's had completed a strategic review of its wine division, set to conclude in February.
Grange Resources Ltd(ASX:GRR) says its merger with private iron ore miner Australian Bulk Minerals (ABM) is on track despite the turmoil in global financial markets, with regulatory approvals expected at the end of November. It would be an all-scrip merger combining ABM's Savage River mining and processing operation in Tasmania and Grange's Southdown project in Western Australia.
Barclays PLC (NYSE:BCS) said Thursday it has acquired Macquarie Bank Limited's Italian mortgage business. Barclays said the business includes a mortgage portfolio with a total outstanding balance of EUR1.1 billion. The bank didn't disclose the purchase price.
Important Corporate News
Travel wholesaler, distributor and retailer Jetset Travelworld(ASX:JET) has slashed profit guidance by 20-30 per cent this year, blaming volatile economic conditions and the weaker Australian dollar for its downgrade. The company would not be able to meet its profit before tax forecast of A$70.6 million for 2008-09 and would fall short by 20-30 per cent.
Employment website Seek(ASX:SEK) has issued its first profit warning since listing on the stock exchange and said the economic slowdown is taking a toll on job listings. Its net profit for the year to June 30 2009 was likely to fall below the A$76.3 million achieved in fiscal 2008, because of the weaker Australian dollar and its increased shareholding in loss-making Chinese employment site Zhaopin.
BlueScope Steel(ASX:BSL) has appointed a chief executive of its Australian distribution and solutions division. Keith Mitchelhill, 45, replaces Mark Vasella, who is heading to the United States to head up BlueScope's North American operations. He will join BlueScope in January and will be based in Melbourne.
1. Related Stocks - Mid Market (AEST 1230)
------------------------------------------------------Code % Change Volume Turnover Low High------------------------------------------------------ASX:FGL -2.95 3,430,966 $20,593,751 589 612ASX:GRR -8.77 71,974 $38,237 57 57ASX:MQG -8.08 749,642 $21,966,348 2887 2984ASX:JET -3.52 16,500 $13,342 85 82ASX:SEK -6.01 1,459,639 $4,818,701 326 339ASX:BSL -6.59 1,200,422 $5,205,627 422 449
2. Top 10 ASX on Turnover - Mid Market (AEST 1230)
------------------------------------------------------Code % Change Volume Turnover Low High------------------------------------------------------ASX:BHP -6.91 7,753,942 $211,669,988 2666 2725 ASX:ANZ -4.24 7,875,401 $146,065,014 1598 1657 ASX:RIO -9.83 1,242,251 $91,220,996 7000 7227 ASX:TLS +1.18 18,524,267 $79,022,275 421 433 ASX:NAB -8.09 4,030,227 $74,088,577 2240 2328 ASX:CBA -1.63 1,577,478 $62,559,299 3880 3925ASX:QGC 8,118,406 $46,684,135 575 576ASX:WBC -3.09 2,134,680 $44,247,718 2016 2055ASX:WPL -6.65 737,501 $29,763,676 3956 4129ASX:NWS -2.96 2,299,753 $28,618,581 1204 1245
