Shares slide 3%, US braces for prolonged recession, more mining job cuts: Economy roundup

The Australian sharemarket has taken a beating today, dropping over 3% in early trade as commodity prices fell again overnight.

The Australian sharemarket has taken a beating today, dropping over 3% in early trade as commodity prices fell again overnight.

The benchmark S&P/ASX200 index was down 129.6 points or 3.5% to 3557.4 points at 12.10 AEDST.

Investors have clearly been spooked by falling metals prices and have savagely dumped mining stocks, with BHP Billiton falling 5.07% to $29.37 and Rio Tinto losing 7.92% to $37.39.

NAB shares also lost 3.3% to $19.99, while AMP dropped 2.5% to $5.36. ANZ shares also lost 2.4% to $14.96.

The dollar also lost ground from yesterday’s close of US67 cents, dropping to US66 cents.

Investors would have found little to be happy about from this morning’s economic news, including a 44,000 fall in full-time jobs in December and Dun & Bradstreet’s prediction that the Australian economy will experience zero growth during 2009.

D&B’s Economic and Risk Outlook Report says Australian GDP will slow to zero from a predicated 1.9% in 2008, and will return to just 1% in 2010.

US retail sales point to prolonged recession

In the US, Wall Street dropped to a six-week low after the release of disappointing retail sales figures from the Department of Commerce, showing sales fell 2.7% in December.

As a result, the Dow Jones Industrial Average dropped 248.42 points or 2.94% to 8200.14. Oil prices also fell to $US37 a barrel.

Also in the US, a stimulus package led by Democratic Party leaders and president-elect Obama officials may reach $US850 billion, according to Reuters.

Business Spectator reports a US Government source suggests the bill for the stimulus package may be unveiled on Thursday, which may include tax cuts and infrastructure funds.

But more aid could come early for some, with the US Government close to providing the Bank of America with billions more in aid, according to The Wall Street Journal.

The paper suggests that the bank is having trouble adjusting to its acquisition of Merrill Lynch, and requires aid to keep the group afloat.

In another blow to the economy, electronics group Motorola will slash 4000 jobs after experiencing worse-than-expected mobile phone sales and expects a loss in its fourth quarter figures.

The group hopes the job cuts, along with other cost-cutting measures, will help save $US700 million in 2009 to help bring expense reductions to $US1.5 billion. The company dropped to fourth place in the worldwide handset market in the third quarter of 2008.

Rio Tinto job cuts, Centro trading halt

Back home, Rio Tinto is set to cut both production and the workforce at its Argyle diamond mine in WA to help reduce its debt levels.

The company planned to finish the mine’s $US1.5 billion expansion by 2010, extending its operation until 2018.

But the company says any underground expansion will be “slowed to only critical development activities”, which will result in job losses.

“Given global market conditions, we will also reduce diamond production by taking an extended maintenance shutdown of the diamond processing facilities for up to three months, commencing in March,” Argyle Diamonds chief operating officer Kevin McLeish says.

And Centro Properties Group has entered a trading halt, ahead of an expected announcement regarding the possible extension of its debt finance.

Centro says shares will being trading no later than 19 January, with shares last trading at 12 cents.

“Centro Properties Group hereby requests that the ASX grant a trading halt of its stapled securities effective immediately, until the making of a pending announcement regarding the outcome of negotiations on the extension of its finance facilities that are due to expire today,” the company said in a statement to the ASX.