Shares surge on US bank bailout, third stimulus package on the way? Economy roundup

The Australian sharemarket has opened over 2.5% higher today after a surge on Wall Street overnight, led by the release of US Treasury Secretary Timothy Geithner’s bank rescue plan.

The benchmark S&P/ASX200 index was up 47 points or 1.32% to 3597.3 at 12.25 AESDT. The dollar has also recorded gains, rising over $US70 cents.

AMP shares have gained 5.8% to $4.71, while Commonwealth Bank jumped 4% to $36.50. Westpac also recorded a 3.1% rise to $19.53, as NAB jumped 2.6%.

Overseas, Wall Street jumped nearly 7% after the Obama Administration released details of its plan to eliminate toxic assets from the balance sheets of major financial institutions.

The Dow Jones Industrial average jumped 497.48 points or 6.84% to 7775.86, as the S&P500 index also gained 54.38 points or 7.08% to 822.92 – the biggest one-day percentage gain since October.

Oil prices also rose to a three-month high at $US53 a barrel.

The large gains were mostly due to the news that the Obama Administration will help wipe out up to $US1 trillion of toxic assets. But investors say the success of the plan will rely on private investment, so markets will be encouraged to continue trading to help unlock credit markets and boost the economy.

Meanwhile, Federal Treasurer Wayne Swan has hinted that the May budget may include a third stimulus package to help boost the economy, but would not confirm either way.

“Our challenge will be to continue to stimulate the economy and continue to invest in the future, while working under the constraints imposed by collapsing revenue and the global recession,” he said in a speech to the Sydney Institute last night.

“It will add to the steps already taken to support demand, support jobs, support growth, and build the schools, roads and homes the nation needs,” he said.

Professor Ross Garnaut, who helped the Government form initiatives to combat climate change, has said that the economy should be in recovery by the time the emissions trading scheme begins in July 2010.

“The recessionary impact of the great crash is likely to be over by the time a mid-2010 emissions trading scheme is introduced,” Garnaut told ABC Radio.

“The period of recovery from recession is a very good time for investment in structural change.”