Shares fall on swine flu, NAB profit slides: Economy roundup

The Australian sharemarket has opened lower today, dragged down by overseas fears that the outbreak of swine flu will continue to spread across the globe and the news that 19 cases are suspected on Australian shores.

The World Health Organisation has lifted its pandemic alert level to “four”, after remaining at phase three for about four years. The alert can go to level six.

The benchmark S&P/ASX200 index was up 24 points or 0.64% to 3755.6 at 11.41 AEST. The dollar was also dragged down to US70 cents.

AMP shares dropped 1.9% to $5.19, while Westpac gained 0.6% to $20.l1 and Wesfarmers jumped 2% to $21.93

NAB shares have dropped 1.5% to $21.70 after it announced that it recorded a 9.4% decline in first-half cash profit to $2 billion and charges for bad debts increased to $1.8 billion from $700 million.

Chief executive Cameron Clyne said the results were due to the deteriorating economy.

“We continued to grow revenue while carefully managing costs, but this was offset by increased bad and doubtful debts and higher funding costs,” Clyne said.

“Collective provision coverage has been increased and includes an additional $86 million that has been added to the economic cycle reserve to take this amount to $300 million.”

Pacific Brands said it will not expect more than a 15% increase in profit, in a response to a query from the ASX, and that it will be affected by $110 million in restructuring costs.

“Although the market remains uncertain, the company does not currently anticipate there will be a variation in operating profit before abnormal restructuring costs and income tax for the year ending 30 June 2009 of more than 15% from the result in the previous corresponding period,” the company said.

“The company has previously advised that it expects to incur restructuring costs in the year ending 30 June 2009 of approximately $110 million in respect of strategic initiatives announced on 25 February 2009.”

Overseas, Wall Street dipped on fears that a new outbreak of swine flu could be dire for the already troubled economy. The Dow Jones Industrial Average dropped 51.29 points or 0.64% to 8025.

Meanwhile, General Motors has proposed a bond exchange offer to avoid bankruptcy, and plans that would see the company shed about 21,000 jobs.

Chief executive Fritz Henderson said that the car manufacturer will file for bankruptcy protection if the plan fails. The company, which has been under intense pressure from the Obama Administration, is currently in the process of restructuring.

The new offer to bondholders is also an attempt to avoid having the US Government control most of the company’s shares.

Back home, Treasurer Wayne Swan has said that Australia’s recovery from the financial crisis will be more rapid than the International Monetary Fund suggests.

“We are in extraordinary times. We are in the middle of global recession. The forecasts do need to reflect that,” he told ABC Radio. He also said that our recovery will “absolutely not” be as slow as the IMF suggests.