Services sector contracts for third consecutive month, Shares keep climbing: Economy Roundup

Activity in the Australian services sector continued to contract for a third consecutive month in March due to weakness in consumer demand negating gains in property and health, new figures from the Australian Industry Group have revealed.

The AIG-Commonwealth Bank performances of services index rose 0.1 points to 48.4, below the 50-point level separating expansion from contraction.

The 200 companies surveyed had experienced declines in sales, new orders and delivers, with consumer-based sectors such as accommodation, cafes and restaurants and retail trade offsetting gains in property, business and communications services.

“The sluggish performance of the consumer-related sub-sectors illustrates a degree of caution on the part of households, strongly influenced by interest rate increases and the anticipation of further rises,” AIG chief executive Heather Ridout said in a statement.

The survey’s index of sales grew by 1.5 points to 48.8, with the measure for new orders falling 1.3 points to 46.8. The wages index grew 0.9 points to 56.8, while the inventory index dropped 0.2 points to 50.5 after a gain in February.

The Australian sharemarket has nudged towards the 5,000 point mark, pushed by fairly solid results from Wall Street overnight and strong gold and oil prices.

The benchmark S&P/ASX200 index was up 10 points or 0.21% to 4964.2 at 12.00 AEST, at US92c.

Commonwealth Bank shares gained 0.1% to $57.32, while NAB shares rose 0.2% to $27.99. ANZ gained 0.6% to $25.60, as Westpac lost 0.7% to $28.06.

Meanwhile, Mirvac Group has said it is currently in talks to buy Westpac Office Trust and intends to raise $350 million through an institutional placement to raise money for further acquisitions.

In a statement, the company said Mirvac will offer eligible security holders a purchase plan to raise a further $150 million.

“Independent directors have approved the entry into discussions on an exclusive basis for a limited period with Mirvac Group regarding the potential acquisition by MGR of all of the units and instalment receipts in WOT and has granted MGR exclusivity to conduct due diligence in relation to WOT,” Westpac Fund Management said in a statement.

“WFML emphasises… that there is no certainty that the discussions will lead to a transaction which the independent directors of WFML will recommend to WOT investors.”

Macarthur Coal rejects Peabody bid

Macarthur Coal has rejected a $3.56 billion bid by Peabody Energy Corporation, saying the offer does not represent an acceptable premium. Additionally, it said the company’s proposal was conditional and uncertain.

“Peabody’s revised proposal remains highly conditional and does not fully value Macarthur and its significant growth prospects,” Macarthur chairman Keith De Lacy said in a statement.

“The Board have recommended the Gloucester takeover and Middlemount acquisition to shareholders and continue to believe these transactions are in the best interests of Macarthur and its shareholders.”

All four of the major banks have passed on yesterday’s 25-point interest rate rise, the fifth rise to occur within the last six RBA board meetings.

The Commonwealth Bank was the first to pass on the rise, with its standard variable rate now sitting at 7.11%. Westpac and ANZ followed, with their rates now at 7.26% and 7.16% respectively. Both also said rates for business lending would rise.

NAB was soon to follow, saying its standard variable rate will now sit at 6.99%. However, the Mortgage and Finance Association of Australia said in a statement the rises should show why would-be homeowners should shop around before taking a loan.

“Changes to the official interest rate can present significant opportunities for consumers who have not already looked into refinancing options,” MFAA chief executive Phil Naylor said in a statement.

“We are seeing increasing competition in the lender market, with smaller banks and credit unions making a strong comeback.”

The founders of Spirit Finance Corp have taken legal action against a specific unit of Macquarie Group, which acquired Spirit in 2007, saying it “gravely” harmed the company.

Founders Morton Fleischer and Christopher Volk said Spirit was “gravely harmed by the self-interested actions, and deliberate inaction, of the majority shareholders, their representatives on the boards, and their consultants”.

The lawsuit has been filed in the American state of Delaware, where Spirit’s parent company is located.

Greece rejects financial aid… for now

Overseas, Greek finance minister George Papaconstantinou has said the country cannot borrow at current rates for some time, but it will not use the financial aid program designed by the European Union and International Monetary Fund for some time.

“Greece will use the mechanism if needed but at this moment there is no such need,” Papaconstantinou said on radio, and also added that he was confident of the country’s economic position.

In the United States, the Federal Reserve has said it could keep interest rates at extremely low levels for some time if the American economy continues to worsen, or inflation levels drop.

“The duration of the extended period prior to policy firming might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further,” the minutes of its last meeting read.

“Such forward guidance would not limit the committee’s ability to commence monetary policy tightening promptly,” they said.

On Wall Street, stocks rose closer to the milestone 11,000-point mark, pushed by solid results in the financial sector. However, the Dow Jones industrial average fell 3.56 points, or 0.03%, to close at 10,969.99.