Shares fall to eight-month low, David Jones sales rise: Economy Roundup

The Australian sharemarket has opened to an eight-month low this morning, dragged down by negative results from Europe and Wall Street where investors are still spooked over debt fears in Europe.

The benchmark S&P/ASX200 index was down 67 points or 1.51% to 4403.3 at 12.00 AEST, while the Australian dollar has also hit a three-month low at US85c.

Westpac shares dropped 2.2% to $22.87, while Commonwealth Bank shares also fell 1.6% to $51.81. ANZ lost 1.2% to $21.46, as NAB fell 1.8% to $24.27.

In New York, stocks fell as investors were hit with news of strengthened financial regulation and troubles in Germany, where regulators are looking to ban naked short selling.

In Washington D.C, Republicans and Democrats will finish debate on the new financial regulation bill and will move to pass the law. Senator Thomas Carter will reveal an amendment next week dealing with a crucial issue.

Meanwhile, officials in Germany have said they will ban naked short selling among the 10 most important financial institutions, sending the Euro to a four-year low.

On Wall Street, the Dow Jones Industrial Average lost 114.88 points or 1.08% to 10,510.95, while the Standard & Poor’s 500 Index lost 16.14 points or 1.42% to 1,120.80.

Back home, retail giant David Jones has recorded a 1.4% rise in third-quarter sales, disappointing investors hoping for an improved performance from the company as the industry suffers due to lower consumer spending.

The company also confirmed its second-half profit guidance, even though it admitted conditions would be difficult during the fourth quarter.

“We also reaffirm our FY11 guidance of [5% to 10%] growth off our FY10 base and reiterate our comments at the time of our 1H10 results, that to achieve the top end of this guidance the retail recovery will have to be in full swing, something Access Economics does not forecast until 2012,” chief executive Mark McInnes said in a statement

Total sales were $417.4 million for the quarter ending April 24, with like-for-like sales rising 1.4% compared to the previous corresponding period.

“As we expected, trading in 3Q10 has been challenging, although in line with our forecasts,” McInnes said. “We have not seen anything in the market that we did not expect, other than the unseasonably warm weather.”

RBA says banks remain profitable

Meanwhile, Reserve Bank of Australia assistant governor Malcolm Edey has told a retail conference that despite a fall in net interest margins in commercial banks, they are still enjoying profitability.

“To complete the story, the downward trend in net interest margins hasn’t resulted in any structural decline in banks overall profitability,” Edey said.

“In broad terms it has been offset by two factors – namely, reduced non-interest costs, and increased non-interest income as banks diversified their business models and reduced cross-subsidies.”

Developer Stockland has confirmed 2010 earnings guidance of 29 cents per share, following on from a 104 cents per share loss during the 2009 financial year. Managing director Matthew Quinn told an investor update in Melbourne that sales momentum remains strong.

“We’re on track to deliver record residential sales this financial year,” Quinn also said in a statement.

“Our Residential Communities margins are expected to increase by between 1% to 1.5% in the second half due to recent price increases, particularly in Victoria and Western Australia.”

In the mining sector, both Fortescue Metals and BHP have continued to criticise the Government for its proposed resource super profits tax. Fortescue has said it will put $17.7 billion of new projects on hold because of the tax, with shares falling 4.65% to $3.87.

“Uncertainty in the financial markets caused by the proposed tax and the cash impost that RSPT payments will place on future business revenues has necessitated an urgent review of the economics surrounding the development of Fortescue’s major projects,” the company said in a statement.

BHP claims dividends at risk due to resources tax

Additionally, BHP Billiton chief executive Marius Kloppers has told the Australian Financial Review that the company’s dividends to shareholders are at risk. He also said the Bowen Basin coal project in Queensland could be moved offshore due to the tax.

Elsewhere, Asciano Group has applied for Federal control of Queensland Rail’s coal and freight business, with managing director and chief executive Mark Rowsthorn saying the move would be necessary to prevent a private QR entity from using a monopoly on tracks to benefit itself financially.

“A privatised QR National, which owns both the freight business and the tracks on which it competes with businesses like Asciano, is intolerable as the existing regulatory structure does not have the necessary protections to deliver a level playing field”, Rowsthorn said.

“The current arrangements allow the network part of the QR National business, QR Network, to structure contracts so that it is difficult for a coal miner to move away from using QR National for its coal haulage requirements.”

Additionally, Telstra chief executive David Thodey has also told the AFR that his company plans to “compete aggressively” with the National Broadband Network unless the Government hands over a fair sum for its network.

However, he also said the two parties are working towards a compromise. “At some point we need to look at what we are going to do with the copper network and so there are some benefits in the new network [over the longer term],” he said.

Meanwhile, shadow treasurer Joe Hockey will outline the Opposition’s reply to the Federal Budget today, and a review of the Trade Practices Act is expected to be included. In a speech to the National Press Club, Hockey is also expected to announce the scrapping of the e-health scheme.