Shares rise again as US considers another stimulus package: Economy roundup

The Australian sharemarket has jumped another 2% this morning following a strong night on Wall Street.

The Australian sharemarket has jumped another 2% this morning following a strong night on Wall Street.

The Dow Jones Industrial Average jumped 4.7% last night after Federal Reserve chairman Ben Bernanke told Congress that the Government should consider a second stimulus plan to help kick-start the US economy.

The US Government sent out about $US100 billion in tax-rebate cheques during June and July, but consumer spending has been sluggish since then.

“With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate,” Bernake told Congress.

“The stabilisation of the financial system, though an essential first step, will not quickly eliminate the challenges still faced by the broader economy.”

Australia’s benchmark index, the S&P/ASX200 index rose 2.2% or 89.2 points to 4231.5 at 11:50am AEST.

Bargain hunters are piling into the mining stocks that were sold off so heavily last week, with BHP Billiton climbing another 6.8% this morning. Coal miner Gloucester Coal, aluminium giant Alumina and construction and engineering firm WorleyParsons have all posted double-digit gains this morning.

In corporate news, NAB posted a 10.7% decline in cash earnings to $3.9 billion for the 2008 financial year, compared to $4.3 billion last year. But in a pointer to worrying times ahead, the bank said its total provisions stood at $3.29 billion, with $1.7 billion set aside to cover bad loans and doubtful debts, including just over a $1 billion racked up on US sub-prime exposure.

Finally, the Australian Securities and Investments Commission has extended its ban on covered short selling by 28 days to 18 November.

But the Alternative Investment Management Association has condemned the extension of the ban.

“The original aim of the ban was to reduce volatility in the markets and this has clearly failed. We question ASIC’s rationale for keeping the ban, as Australia has one of the most secure banking systems in the world,” AIMA chairman Kim Ivey says.