Shares fall after Wall St drops 200 points, inflation falls to 1.3%, IMF flags global recovery: Economy Roundup

The Australian sharemarket has opened almost 2% lower after Wall Street suffered its worst day in a quarter due to pessimistic results from official labour data and a private reading of manufacturing activity.

The benchmark S&P/ASX200 index was down 93.6 points or 1.99% to 4607.5 at 12.05 AEST. The Australian dollar also lost ground to US86c after reaching a 13-month high of US89c yesterday.

ANZ shares fell 2.6% to $23.48 as Commonwealth Bank shares dropped 2.1% to $49.81. Westpac lost 2.8% to $25.18, while NAB shares fell 1.6% to $29.87.

Overseas, Wall Street stocks fell after new data showed that while consumer spending rose at its fastest rate in eight years, the number of people claiming jobless benefits rose.

The Labour Department released figures that showed claims for state unemployment benefits rose to 551,000 last week from 534,000 during the previous week, well above expectations for just 530,000 – the first rise in three weeks.

Meanwhile, the Institute for Supply Management said the index of national factory activity fell to 52.6 in September from 52.9 in August, below the market expectations of 54. Subsequently, the Dow Jones Industrial Average fell 203 points, or 2.09% to 9,509.28.

Annual inflation drops to 1.3%

Back home, a private gauge of inflation has remained flat during September for a second consecutive month with the annual pace now at its lowest point in the index’s seven-year history.

The TD Securities-Melbourne Institute monthly inflation gauge remained unchanged, while annual inflation fell from 1.7% to 1.3% during August, well below the RBA’s long-term target of between 2% and 3%.

The Ten Network has said the directors appointed by former shareholder CanWest Global Communications have stepped down after the Canadian Company sold down its 50.1% share.

Leonard Asper and Thomas Strike resigned from their positions effective immediately, the company said, with chief executive Nick Falloon thanking the two in a statement.

“Over the period of their involvement, Ten has experienced immense change and development, including in recent times when our businesses have been soundly positioned not only to weather the current economic conditions but also to benefit from opportunities arising in the sector,” he said.

Babcock & Brown Infrastructure has requested its securities be suspended from trading on the ASX during the company’s discussions with some potential investors.

“The parent company of BBI EPS Limited, Babcock & Brown Infrastructure Limited, has requested an immediate suspension to enable discussions to continue with potential investors in respect of the recapitalisation proposal referred to in BBI’s announcement of 4 September 2009,” BBI said in a statement.

NBN Co. looks to telcos for asset purchases

The National Broadband Network Company is in early talks with telecommunications companies regarding the purchase of assets to help start the construction of the $43 billion network.

“We’re looking at potential asset acquisitions, in some cases, that would give the company a base from which to grow,” chief executive Mike Quigley said in a Senate committee yesterday.

Back overseas, the International Monetary Fund has raised forecasts for Australian economic growth and has stated unemployment will only peak at 7% during 2010.

In the organisation’s latest World Economic outlook report, it said Australian GDP will reach 0.7% for 2009, up from the previous estimate of just 0.5%. It said Australia is expected to be the only advanced economy that will see growth this year.

“The recent evolution of industrial production, retail sales, and confidence indicators suggests that Australia is on its way to recovery,” the IMF said, also noting that the global economic recovery has appeared to have begun.

“After a deep global recession, economic growth has turned positive, as wide-ranging public intervention has supported demand and lowered uncertainty and systemic risk in financial markets,” it said, but also warned against a quick withdrawal of stimulus.

“Premature exit from accommodative monetary and fiscal policies is a particular concern because the policy-induced rebound might be mistaken for the beginning of a strong recovery,” it said.