Shares lose ground, Westpac chief warns rate cuts may not be passed on: Economy roundup

The Australian sharemarket opened slightly higher today after positive leads from Wall Street, but has since dropped into negative territory as the banks, Telstra and BHP Billiton were sold off.

The benchmark S&P/ASX200 index was down 31 points or 0.8% to 3910.7 at 12.05 AEST.

The dollar has also reached a new seven-month high, opening at US76 cents.

NAB shares dropped 0.5% to $22.66, as Commonwealth Bank also lost 0.5% to $36.54. Westpac lost 0.9% to $20.42, as Woolworths lost 1.8% to $25.89.

Westpac chief executive Gail Kelly has said that the next six months will be difficult and that despite early signs of economic recovery any rate changes may not be passed on to customers.

“Certainly on the deposit side pricing has become a lot better from a customer point of view, which is excellent, but from a bank point of view you’ve seen the squeezing in retail deposit margins,” Kelly told Business Spectator.

“On the wholesale side of things it remains very expensive, although there are some signs and some evidence that there’s improvements in credit markets, and we’re hoping that that continues.”

Beverage giant Lion Nathan has agreed to the terms of a $US2.5 billion takeover from Japanese brewery Kirin Holdings. The offer must still be approved by Lion’s non-Kirin shareholders in a vote that may occur in either September or October.

The deal must also be approved by regulators. If it goes ahead, Kirin would own the XXXX Gold and Hahn Beer brands, as well as juice company National Foods and milk company Dairy Farmers.

Clothing group Pacific Brands has entered a trading halt before it embarks on a share sale.

“The trading halt is necessary as Pacific Brands expects to make an announcement to the market in relation to a capital raising involving retail and institutional investors,” the company said in a statement.

The company has shed 1850 workers over the past year and a half, and is moving production overseas to combat the harsh economy. It is also selling some of its assets, and discontinuing smaller brands and labels.

Meanwhile, Qantas Airways said it will return maintenance work of its A330 fleet to Brisbane. Chief executive Alan Joyce said the company has reached agreements with employees.