Australian shares fall 2.8% as global markets take battering: Economy Roundup

The Australian sharemarket has opened over 2.8% lower this morning due to a shocking result on Wall Street overnight, where the Dow dropped nearly 4% on new fears over the European debt crisis.

The result comes after Germany announced it would ban naked short selling, with investors still wary about several troubled economies in Europe, including Greece, Spain and Portugal.

The benchmark S&P/ASX200 index was down 112 points or 2.61% to 4203.8 at 11.50 AEST, while the Australian dollar has also continued its fall to US82c.

In the past 30 days, the ASX200 has fallen 719 points or 14.52%. The majority of that has occurred in the past five days, with shares falling 8.16%, or 376 points.

The Dow Jones Industrial Average has fallen 1046 points, or 9.44%, in the past month.

NAB shares were down 2.8% to $22.59, as Commonwealth Bank shares lost 1.8% to $49.19. ANZ lost 1.4% to $20.35 as Westpac lost 1.9% to $21.38.

In the United States, the passing of a financial reform bill in the Senate emphasised poor performance on the stock market, with the Dow Jones Industrial Average dropping 376 points or 3.6% to 10,068.01 at 11.50 AEST.

The Standard & Poor’s 500 Index dropped 43.46 points, or 3.90%, to 1,071.59, while the Nasdaq fell 94.36 points or 4.11% to 2,204.11.

In the nation’s capital, senators have passed a Wall Street reform bill in the biggest piece of financial regulation since the 1930s. The legislation will demand tighter rules for banks and financial markets, and must now be merged with a version from the House of Representatives.

President Barack Obama said at a press conference the passing of the bill will enable safer trading, but ensure the operation of a free market.

“Over the last year, the financial industry has repeatedly tried to end this reform with hordes of lobbyists and millions of dollars in ads, and when they couldn’t kill it they tried to water it down… Today, I think it’s fair to say these efforts have failed,” Obama said.

“We’ve still go some work to do,” he added. “The House and the Senate will have to iron out the differences between the two bills. And there’s no doubt that during that time the financial industry and their lobbyists will keep on fighting.”

Sigma considering takeover offer worth $707m

Drug manufacturer Sigma Pharmaceuticals has said it is considering a takeover offer worth 60 cents per share, which would value the company at $707 million. Shares in the company have soared 42% on the news to 50 cents, despite the market dropping nearly 3%.

“The Sigma Board is considering the proposal and recommends that shareholders take no action at this stage. Sigma will make a further announcement in due course,” the company said in a statement to the ASX.

The move comes after a number of the company’s executives have resigned, including chairman John Stocker and non-executive director Doug Curlewis.

Meanwhile, Suncorp Metway has said it will improve underlying margins in its general insurance business by 3% over two years as it simplifies pricing. The company expects $235 million in annual benefits by June 3013.

“Our insurance business holds a clear advantage over competitors because of its scale; its industry leading suite of brands; and the fact that we have end to end control of our own manufacturing, pricing and distribution channels,” chief executive Patrick Snowball said today in a statement.

“Our move to a functional model and a single view of pricing and claims will ensure the general insurance business leverages scale advantages across all of its brands and unlocks the potential in functional capability that has not been realised to date.”

Meanwhile, BHP Billiton chief executive Marius Kloppers has told The Australian that the proposed mining tax has cut the value of its proposed iron ore merger with Rio Tinto.

“Clearly the value of what we are buying is impacted by uncertainty,” Kloppers is reported as saying.

“In this case, the uncertainty is on my side because I’m buying and the tax impacts potentially the value of what I’m buying – but I’m sure that as we still have some time left, Tom (Albanese, Rio’s chief executive) can equally argue that some things happen that work the other way.”

The comments come as a number of mining companies have continued to oppose the proposed mining tax, saying it will eradicate investment and create uncertainty within the tax system.

Rio Tinto not opposed to form of profits tax

However, Rio Tinto Coal Australia managing director Bill Champion has told Reuters the company isn’t necessarily opposed to a profits-based tax.

“We aren’t opposed to a profits tax but we are interested in a tax reform that encourages investment,” he said.

“We have also said that while we are not completely supportive of current royalty regimes in the states, we would be interested to talk about a profits-based tax and migrate away from a revenue-based tax.”

In the Middle East, Dubai World has managed to restructure $US23.5 billion worth of debt with some of its core lenders, easing investors’ fears the state would default and cripple world markets.

While lenders will have to wait eight years to recoup their $US14.4 billion, negotiators have said the deal represents a solid compromise.

“We are not entirely happy, but we are in a no-choice situation. Under the circumstances, this seems the best deal possible, even though it is not entirely satisfactory,” a banker told Reuters.