Consumer confidence flat after rate cut, shares fall 1.8%: Midday roundup

Confidence has risen slightly during May after the Reserve Bank slashed the official interest rate by 50 points, according to the latest figures from the Westpac-Melbourne Institute Consumer Sentiment Index.

The Index rose by 0.8% to 95.3 points, up from 94.5 in April.

Westpac chief economist Bill Evans said he had hoped there would be a larger increase, given the RBA cut was larger than expected. But he says other factors have offset this good news.

“Firstly there might have been a degree of disappointment amongst households that the standard variable mortgage rate was reduced by only an average of 0.37%.”

“Secondly, increasingly disturbing news around Europe and specifically Greece is likely to have unnerved households.”

Evans points out the confidence level is still 2% under the position it was in last October, even when the official cash rate was higher – and consumers didn’t like the federal budget, either.

“We asked a supplementary question in the survey: What impact do you expect the federal budget to have on your family finances over the next 12 months?” Evans said.

“The results were disappointing, with only 9.9% of respondents indicating that the budget would improve family finances while 36% indicated the budget would worsen family finances.”

Three of the five components of the index increased, with the component covering family finances up 17% on a year ago. The index for finances within the next five years was up 1.8%, while the index covering views on finances for the next 12 months was up 1.3%.

Shares fall nearly 2% on Greece woes

The Australian sharemarket has fallen 1.8% this morning to a two-month low after another shocking night on offshore markets, as the prospect of political uncertainty in Greece has caused more fears over the country’s economic future.

Fresh elections are to be held next month as elected parties could not reach an agreement overnight.

The benchmark S&P/ASX200 index was down 79 points or 1.8% to 4187.3 at 12.00 AEST, while, the dollar held its own at $US0.99c.

In the United States, the Dow Jones Industrial Average fell 63.4 points or 0.5% to 12,632.

Political turmoil continues in Greece

The Australian dollar also fell slightly after talks between Greek political parties failed, leading to fresh elections next month.

The main political parties have been attempting to form a government after last week’s elections. However, factions are at war over austerity measures required to receive bailout funds.

Socialist party leader Evangelos Venizelos announced overnight that talks between the parties had failed.

Toll shares fall 14% on profit forecast

Toll Holdings shares fell 14% this morning after the company said its pre-tax earnings for the financial year will be lower than the previous corresponding period.

The company said it now expects pre-tax earnings of between $400-420 million, down from the previously recorded $436 million.

Chief executive Brian Kruger, said the business had come under “continued pressure from the soft retail sector”.

”In addition, we had seen a deterioration of the performance of Footwork Express, and continued poor financial and operational performance in Toll Marine Logistics … particularly in Asia,” he said.