Sharemarket stabilises after initial 2% drop: Midday Roundup

The Australian sharemarket has gained back some losses made this morning after an initial drop of 2%, after turmoil on the weekend when Standard & Poor’s announced a downgraded to the US credit rating, indicating the local impact of the decision may not be as great as first thought.

The benchmark S&P/ASX200 index was down 31 points or 0.77% to 4077 at 12.15 AEST, while the Australian dollar remained flat at $US1.04c.

AMP shares have fallen 0.25% to $3.98, while Commonwealth Bank shares have risen 0.41% to $46.45. Westpac lost 0.1% to $19.25, as NAB fell 0.87% to $21.58.

But despite the initial stabilisation in markets economists are still predicting that the Reserve Bank will drop interest rates when it meets next month. According to Fairfax, Credit Suisse data is indicating a rate cut, while ANZ has already announced it expects the next move to be downwards.

Westpac global head of interest rate strategy Russel Jones also told Fairfax that if global conditions deteriorate then rates may fall.

“During the GFC, it was very willing and able to cut rates aggressively when things deteriorated,” he said. “If it continues to get worse, they could well pull the trigger.”

Meanwhile, Treasurer Wayne Swan has continued to reinforce the message that Australia remains closely linked with Asia instead of the United States, and that the Australian economy remains fundamentally sound.

“I spoke to (US Treasury Secretary Timothy Geithner) last night and I’ve spoken to a number of them in the last few weeks, because what we have to do internationally is to make sure we have worked together to deal with these challenges,” he told ABC this morning.

“Our fundamentals are strong but we are not immune from the fallout from events either in the US or in Europe.”

Swan also said that it is too early to decide whether the world is facing another financial crisis.

“There is not a G20 finance minister who wouldn’t swap places with me in the environment we are in at the moment,” he said.

Job ads fall 0.7% in July

The number of job advertisements posted both online and in print media fell by 0.7% in July after a 3.7% rise in June, according to the latest figures from ANZ.

The survey showed that online job ads fell 0.7%, while newspaper jobs fell by 0.5%.

“Historically, declining trends for job advertising have been consistent with rising unemployment and declining interest rates, though the trend to date is quite modest,” ANZ head of Australian economics and property research Ivan Colhoun said in a statement.

“Encouragingly, there was no significant immediate change in job advertising in the weeks following the announcement of the Government’s ‘Australia’s Climate Change Plan.'”

Bendigo bank net profit rises 41%

Bendigo and Adelaide bank has reported a 41% increase in net profit to $342.1 million, although it says it still expects the market to remain volatile.

“Today’s result shows that support is being returned to the bank, and augurs well for our earnings outlook and availability of funding in a market that we expect to remain volatile,” Bendigo and Adelaide Bank managing director Mike Hirst said in a statement.

The bank also said that it expects lending conditions to remain tight.

Rio bids for Coal & Allied shares

Rio Tinto has made a $10.6 billion offer for the remaining shares in Coal & Allied Industries.

The company said that if the offer is accepted, a new entity owned by Rio Tinto and Mitsubishi will start an off-market takeover for the remaining shares.

“If completed, the indicative proposal would result in those parties owning 80% and 20% of CNA respectively,” Rio said in a statement.