Macquarie Group profit plunges, Manufacturing sector struggles: Economy roundup

Macquarie Group has announced that it recorded a lower-than-expected full-year profit of $871 million, down a massive 52%. It is the first time the group’s profit has fallen in 17 years.

The group’s shares have entered a trading halt before a possible capital raising that is rumoured to be between $500 million and $1.2 billion.

Chief executive Nicholas Moore said the bank still maintains strong funding and a good balance sheet position, despite announcing $2.5 billion in writedowns.

“While there were some early signs of markets stabilising in March and April, significant uncertainties remain and it is still too early to make any judgements on sustained market improvements,” he said.

Manufacturing slips again

More bad news on the manufacturing front, with new figures showing industry activity slipped to new lows during April.

The Australian Industry Group-PricewaterhouseCoopers Performance of Manufacturing Index fell 3.1 points to 30.1, below the 50-point threshold separating expansion from contraction.

“There was no let up for manufacturers in April, with weakness and uncertainty continuing to characterise the sector,” Australian Industry Group chief executive Heather Ridout said in a statement.

“Weak demand in both domestic and global markets contributed to the ongoing contraction.”

Shares flat

The Australian sharemarket has opened lower today after Macquarie’s announcement, and US car maker Chrysler applied for bankruptcy.

The benchmark S&P/ASX200 index was down 12.2 points or 0.3% to 3768.3 at 12.20 AEST. The dollar also dropped from yesterday’s US73 cents to US72 cents.

NAB shares lifted 1.3% to $20.89, while Commonwealth Bank lifted 0.1% to $35.14. BHP Billiton lost 1.1% to $32.90 as Woolworths declined 0.8% to $26.50.

In the US, Wall Street struggled under the weight of Chrysler’s bankruptcy application. The Dow Jones Industrial Average dropped 17.61 points, or 0.22%, to 8168.12.

The carmaker has filed for bankruptcy and announced a new deal with Fiat after restructuring negotiations failed. President Barack Obama claimed the move was an important step in saving 30,000 jobs.

As part of the bankruptcy filing, the US Government will give $US3.5 billion in debtor-in-possession funds and up to $US4.5 billion in exit finance.

Once Government loans are repaid, the Italian carmaker can become the majority owner of the company.

Unemployment set to spike

Back home, there’s more bad news for the economy. Unemployment will peak at over 8% with one million Australians out of work, according to a report in The Australian.

The paper quotes leaked information that also reveals the 12 May budget will include a forecast of 0.5% economic contraction for the year ending 30 June 2010.

Treasurer Wayne Swan declined to comment on the rumours, but did make the announcement that the economy will record a writedown in the federal budget of over $115 billion.

“There are very substantial revenue writedowns which are producing a temporary deficit, $115 billion between the budget last year and February this year, and further to come, solely as a result of the global recession and the revenue writedowns that come from it.”

“[The writedowns are] equivalent to about four years of family payments and childcare benefits,” Swan said. “They are very substantial, probably the largest in living memory. We’ll see them on budget night.”