Shares jump 2%, ACCC investigates Coles and Woolworths’ big fuel discounts: Economy roundup

The Australian share market has recorded a solid start to the day, opening 2% higher after positive leads from Wall Street due to comments from analysts indicating strong results for major banks.

The benchmark S&P/ASX200 index was up 82 points or 2.19% to 3819.5 at 11.30 AEST. The Australian dollar also gained ground to US78c.

AMP shares gained 3.5% to $4.78, while Commonwealth Bank also lifted 2.7% to $37.70. Westpac rose 2.4% to $19.37 as NAB gained 2.5% to $22.48.

In the US, Wall Street posted gains after analyst Meredith Whitney told CNBC television that bank shares are likely to see short-term gains of 15% and that major banks including Bank of America and JPMorgan Chase & Co. could post good second quarter results.

The Dow Jones industrial average rose 185.16 points, or 2.27%, to end at 8,331.68.

But it wasn’t all good news in America, with the Treasury Department announcing the Federal Government recorded a $94.32 billion budget deficit in June. Through the first nine months of the 2009 financial year, the US Government has recorded a $1.086 trillion deficit.

ACCC investigates fuel discounts

The Australian Competition and Consumer Commission is investigating an offer by supermarket groups Coles and Woolworths that would offer petrol discounts of 40 cents per litre to ensure the companies are not driving competitors away.

The promotion is offering a 40c per litre discount to customers who spend over $300 in one visit to the supermarkets in the next three days. Those who spend over $200 will receive a 25c per litre discount, with those spending over $100 receiving a 10c per litre discount.
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ACCC Petrol Commissioner Joe Dimasi told AAP that the ACCC is not suggesting the supermarkets have breached any laws, but they will be watched to ensure the discount is not being used “in a predatory way to drive competitors out of business”.

“I’m not suggesting for a moment we think there is anything wrong with it, discounts that enable consumers to get lower petrol prices are generally a good thing,” he said.

“If we’ve got two supermarket chains competing to get people into their stores, providing benefits to consumers on a regular basis, that’s well and good. So long as it isn’t aimed at a particular competitor and done with the aim of driving someone out of business by pricing below cost in a sustained way over a long period of time.”

Virgin Blue denies capital raising

Meanwhile, discount airline Virgin Blue has said in a statement to the market that reports stating it was seeking to raise more capital in a share issue are false and it has not approved such a move.

“Given the prevailing macro-economic conditions, Virgin Blue Airlines Group assesses capital management initiatives as appropriate, however the Board has not approved any such transaction as has been reported,” it said.

Rumours of a capital raising came after the company entered a trading halt. Virgin shares exited the halt this morning, but fell 4.9% to 29 cents.

Asciano Group chief executive Mark Rowsthorn has sold $50 million worth of shares to meet liabilities under the company’s capital raising.

“I am writing to inform you [Asciano chairman Tim Poole] and the rest of the board that I have taken up my full entitlement offer of approximately 76.2 million stapled securities under the Entitlement Offer,” Mr Rowsthorn said in a letter to Poole.

“To fund this participation, I have sold 40 million existing Asciano stapled securities at a price of $1.25 and obtained a loan for the remaining amount.”