Shares fall 2% as Wall Street slides, ANZ cash profit rises: Economy Roundup

The Australian sharemarket has fallen over 2% this morning following a bad night for stocks in the US, as data for new homes sales delivered worse-than-expected results.

The benchmark S&P/ASX200 index was down 87.1 points or 1.86% to 4585.9 at 12.00 AEST, while the Australian dollar was also down 1.44% to US89c.

Commonwealth Bank shares dropped 1.7% to $52.15, while NAB shares also fell 2.1% to $29.19. Westpac shares fell 2.3% to $26.09, as AMP lost 1.3% to $5.98.

Sales of new homes in the US fell during September in the first decline in six months, with investors now nervous that an economic recovery could be further away than originally feared.

New single-family home sales dropped 3.6% to 402,000, according to the Commerce Department, down from a Reuters poll which expected sales to rise to 440,000.

The news sent the Dow Jones Industrial Average down 119.48 points, or 1.21% to 9762.69, the third triple-digit drop in four days.

ANZ shares drop, expects bad debt cycle to continue

Back home, shares in ANZ have fallen 1.7% to $22.95 as the bank announced its bad debt cycle is likely to continue through the current financial year.

ANZ announced a 12% rise in cash profit to $3.38 billion for the year ending 30 September, up from $3.03 billion last year, white net profit fell 11% to $2.94 billion.

“[During the economic downturn], we have seen bad debts emerge from highly leveraged entities and more recently from the commercial sector and higher risk personal customers,” ANZ chief executive Mike Smith said in a statement.

“We expect this will continue into 2010. However, given the resilience of the Australian economy, the stabilisation we are beginning to see in the New Zealand economy and the strength of the Asian economies, particularly China, we believe credit quality has now stabilised.”

Smith said the bank’s outlook is cautious as it recognises the outlook for the economy remains “fragile”, and said that the RBA was too quick to raise interest rates as “the biggest worry at the moment is the interest rate environment”.

AGL Energy has announced it will be aiming for underlying profit to be up 10.8% during 2009-10, with managing director Michael Fraser saying the company will aim for profit to be between $390 million and $420 million.

He also said the company has made a “solid” start to the year.

Macquarie Media Group has confirmed its US unit American Consolidated Media has breached some of its loan covenants, putting its $US81.2 million investment in the US firm at risk.

“There can be no assurance that any forbearance, amendment or extension will be provided, or that the requested waivers will be provided,” the company warned.

Macquarie Media said it will make an announcement to the ASX if any developments arise from discussions.

Federal Government sticks to stimulus timetable

The Federal Government has said it will stick to its timetable for economic stimulus, and has rejected any accusations that its spending has helped ramp up inflation.

“The level of stimulus is going to unwind by itself and that’s going to commence at the end of next year,” Finance Minister Lindsay Tanner told ABC Radio today.

“We believe those settings are correct,” Tanner said, arguing the stimulus represented just “a very small percentage” of total spending.

Lihir Gold has recorded a 7% drop in third quarter production saying routine maintenance work has prevented outputs from reaching their full capacity. But despite the setbacks, managing director Arthur Hood said in a statement the company is set for good financial results, and announced the release of an interim dividend.

“The improved reliability of production at Lihir Island, coupled with diversified income streams created by operating mines in three countries and the strengthening of the company’s balance sheet over recent years have provided the basis for the decision.”

In New Zealand, the central bank has decided to keep the official interest rate at a record low of 2.5% and said it expects it to stay at that level until late 2010. Governor Alan Bollard said in a statement the economy is growing, but challenges remain.

“There remain significant vulnerabilities and challenges to be worked through in many economies. This process could weigh on global growth going forward… We expect to keep the official cash rate at the current level until the second half of 2010.”