Markets recover as EU announces Greek bailout plan: Economy Roundup

Australia’s sharemarket has jumped 2% after European Union finance minister agreed on an emergency bailout worth $700 billion in order to prevent the debt crisis in Greece from affecting nearby nations, which would threaten the ongoing economic recovery.

The move has sparked a recovery in Asian financial markets, which suffered considerably during the past week as investors feared for Greece’s future.

“The fiscal efforts of the EU member states, the financial assistance by the (European) Commission and by the member states (and) actions taken today by the ECB proves we shall defend the euro whatever it takes,” EU Monetary Affairs Commissioner Olli Rehn told a news conference.

The deal contains a mixed bag of loans and guarantees, which has been developed alongside negotiations with the International Monetary Fund.

World financial markets plummeted last week after fears grew that Greece would default on its debt, with the country’s deficit surging to nearly 14% of GDP.

The Australian sharemarket has opened about 1% higher today following the dismal week both internationally and domestically, with news of the new European bailout boosting investor confidence.

The benchmark S&P/ASX200 index was up 2.07% or 92.79 points to 4573.5 at 12.15 AEST, while the Australian dollar also received a boost to $US90c.

ANZ shares have gained 3.4% to $22.64, while Commonwealth Bank shares rose 3.3% to $54.77. Westpac rose 2.8% to $24.84 as NAB gained 3.3% to $25.39.

Job ads, confidence fall as interest rates rise

The total number of job advertisements fell by a seasonally adjusted 1.2% during April compared to March, with an average of just 160,660 ads per week.

But while the number of advertisements has fallen on a monthly basis, the annual increase has now reached 14.9% as the job market continues to recover.

The number of internet job ads fell by 1.3% during April, contributing to a 14.7% annual increase, while job ads in newspapers fell by 0.7% from March to April, contributing to a 17.6% annual increase.

ANZ chief executive Warren Hogan said in a statement the 1.2% fall wasn’t actually surprising given the recent interest rate rises.

“Solid momentum in job vacancies, combined with other forward looking indicators of labour demand, point to further employment growth through 2010. This is consistent with the broader outlook for the Australian economy,” Hogan said.

“We expect the RBA board to sit on the sidelines in coming months and observe how the economy evolves.”

However, Hogan also said that given the upgrades to the RBA’s growth and inflation forecasts, “the central bank has little room for error”.

Meanwhile, business conditions and confidence both dropped in April due to higher interest rates and soft results in retail, construction and transport, according to the latest National Australia Bank monthly business survey.

The confidence index fell three points to 13, with business conditions falling five points to eight, erasing any gains from last month. However, the survey said it isn’t all bad news.

“Overall while business outcomes, confidence and new orders all eased back in April, the Survey readings still point to an economy travelling with a good deal of momentum.”

Meanwhile, toll road operator Transurban has sealed an agreement to purchase the Lane Cove Tunnel in Sydney for $630.5 million.

The company has said it will undertake a $542.3 million capital raising at a price of $4.6 per security, in order to partially fund the deal. However, the two Canadian pension funds considering a buyout of Transurban are now reconsidering their position.

“In particular, CPPIB and OTPP have said that if Transurban raise any equity to fund LCT, there is a strong chance that they would not be in a position to be forthcoming with a proposal,” Transurban said in a statement.

“Transurban understands that OTPP and CPPIB would appreciate the opportunity to meet late Tuesday May 11, 2010 or early Wednesday May 12, 2010. Transurban does not know if the meetings will proceed or whether a proposal will be made,” the company said.

Macarthur recommends no action on Peabody bid

Back home, Macarthur Coal has told its shareholders that they should take no action on a downwardly-revised takeover offer of $15 per share from Peabody Energy.

The mining giant has said its directors have yet to make a recommendation on the deal, which would allow three major shareholders to retain their original stakes in the company.

“The definitive proposal delivers a clear, compelling and significant premium for Macarthur shareholders, and follows Peabody’s due diligence as well as the introduction of the Australian resources profit tax proposal,” Peabody said in a statement.

As reported by The Age, the Commonwealth Bank of Australia’s institutional banking arm has said it will not pursue any major stockbroking acquisitions and will concentrate on international development.

The head of CBA’s institutional banking division, Ian Saines, told the publication that it had no second thoughts about withdrawing a bid for ABN Amro.

“Given what has happened since then, it was the correct thing to do, since integrating them [their respective businesses] was going to be difficult,” he said.

Incitec Pivot has recorded a 33% rise in first-half profit, and has said its earnings will be biased towards the second-half of the year. Net profit after tax rose to $132.4 million.

“Americas Explosives Business will continue to face challenging cyclical trading conditions,” Incitec said. “The business is well placed to benefit from the eventual recovery in the US economy, although the timing of any recovery is uncertain.”

Meanwhile, treasurer Wayne Swan has called for calm regarding the new mining tax, telling company managers to “calm down, get into the process and engage properly”.

The comments come after a number of mining giants, including Clive Palmer and BHP chief executive Marius Kloppers, have attacked the tax.