Shares fall 2% on Obama’s banking regulation proposal: Economy Roundup

The Australian sharemarket has dropped 2% this morning after Wall Street stocks fell by a similar amount due to fears president Barack Obama’s new financial regulation plans will put unwanted restrictions on the banking sector.

Obama said at a press conference his proposed rules would cap the size of banks in relation to the financial sector, preventing them from investing in, owning or sponsoring hedge or private equity funds.

“We should no longer allow banks to stray too far from their central mission of serving their customers,” Obama said. “Too many financial firms have put taxpayer money at risk by operating hedge funds and private equity funds and making riskier investments to reap a quick reward.”

Additionally, the proposed legislation would stop large banks from proprietary trading operations, which involves bets on financial markets with the bank’s own money. Analysts suggest this action causes market volatility.

But the market seemed to be volatile enough after the announcement this morning, with JPMorgan Chase and Co. dropping 5.8%, Citigroup falling 6.36% and Bank of America falling 7%. Goldman Sachs also fell 5.5%.

But the news wasn’t all bad on Wall Street, with internet search and advertising giant Google recording higher-than-expected fourth quarter profit.

The company announced its profit per share was at US$6.79, well above the previous year’s figure of US$5.10 and above the market forecast of US$6.48. Revenue rose by 13% to US$4.95 billion. Chief executive Eric Schmidt said its headcount had increased to 19,835 in the quarter, following nine months of declines due to the financial crisis.

“As we enter 2010, we remain hugely optimistic about the internet and are continuing to invest heavily in technological innovation for the benefit not only of our users and customers, but also the wider web.”

But the Dow Jones Industrial Average recorded its worst result for the year so far, falling 213.27 points or 2.01% to 10,389.88. The Standard & Poor’s 500 index fell 21.57 points or 1.9% to 1116.47.

Australian shares fall after US declines

The result was similar in Australia, where shares have fallen due to the US market drop and a decline in European equity markets.

The benchmark S&P/ASX200 index was down 80 points or 1.66% to 4747.1 at 12.00 AEST. The Australian dollar also opened at a two-week low at US90c.

Commonwealth Bank shares lost 2.1% to $55.40, while Westpac also lost 2% to $25.11. NAB fell 1.9% to $26.67, with ANZ falling 2.7% to $22.63.

In the mining sector, Woodside Petroleum has recorded a 13% decline in fourth quarter production compared to the same period in 2008, with revenue falling 23% to $1.26 billion.

Full year revenue fell 27% to $4.35 billion, compared to $5.99 billion in the corresponding period a year previously, while sales dropped 9% to 20.6 million barrels of oil equivalent.

However, the company said full-year results would fare slightly better due to foreign exchange deals, which are worth about $530 million in after-tax profit.

Lihir Gold has recorded a 19% rise in its firth quarter output with 278,000 ounces, while the company expects 2010 output to be between 960,000 and 1 million ounces.

“We have well developed plans for each of our businesses and projects and we are intent on executing these well,” chief executive Phil Baker

“We aim to achieve consistent and reliable performance at all our operations, delivering on our guidance and keeping our expansion projects on track and within budget to raise our operating capacity to 1.3 million ounces per year by the end of 2011.”

Macquarie Infrastructure downgrades portfolio value

Macquarie Infrastructure Group has reduced the value of its portfolio by 0.3% as the fund prepares for a vote on its restructure today.

The valuation, excluding cash and non-investment balances, was $5.08 billion as of December 31, compared with $5.09 billion as of June 30, 2009. The main reason for the recent reduction was a drop in the value of Macquarie Atlas Roads.

Australian Agricultural Company has announced it expects a net loss after tax of between $53 million and $60 million for the 2009 year, saying a harsh trading environment is a key factor.

The company said the effects of the 2008 drought will be brought to light in its 2009 results, along with cattle losses, high restocking costs, exchange rates and downward pressure on cattle prices.

While treasury secretary Ken Henry has announced future governments should look at increasing tax rates, current federal treasurer Wayne Swan has said workers who perform for longer hours should receive tax breaks.

“So that when people work a few extra hours, when they’re on average incomes, they don’t get hit for six,” he told ABC Radio. “It’s a question of putting in place the right incentives so people who work hard to make our country great get a fair go in the tax system,” he said.

His comments come as the Federal Government prepares to release the Henry report.