Shares open over 1.5% lower, telco legislation passes lower house: Economy Roundup

The Australian sharemarket has opened over 1.5% lower this morning after a shocking performance overseas, with American stocks down due to the prospect of more bailouts in Europe.

The benchmark S&P/ASX200 index was down 65 points or 1.4% to 4634.4 at 12.10 AEST, while the Australian dollar also continued to lose ground moving to US97.5c.

ANZ shares lost 1.6% to $22.84 as Commonwealth Bank shares lost 0.7% to $49.56. Westpac fell 1.7% to $21.82 as AMP dropped 1.3% to $5.19.

Meanwhile, a leading index of economic activity has fallen in September in a fifth consecutive month of declines.

The Westpac-Melbourne Institute of Leading Index of Economic Activity resulted in an annualised growth rate of 4.6%, now only 1.5% above trend. Westpac says this points to expansion in early next year, but the pace is still slow.

“The speed of the turnaround is a little disconcerting,” senior economist Matthew Hassan said in a statement.

“At 10.3%, the peak growth rate in the Index back in March was extremely high and although it currently remains comfortably above its long term average, a continuation of trends seen over the last few months could easily see the growth rate drop further in the near term to a below average pace.”

In Canberra, the Government’s legislation that mandates Telstra be split into separate wholesale and retail networks has passed the lower house, while a Coalition bill calling for a cost-benefits study on the NBN has failed.

Parliament voted on the Government’s bill last night, which brings it a step closer to finalising an $11 billion deal with Telstra that will see the telco hand over copper networks for use on the NBN.

However, the Coalition’s bill, which was led by opposition communications spokesperson Malcolm Turnbull, has failed. Amendments included a mandatory cost-benefits analysis to be conducted by the Productivity Commission.

However, while the Government’s legislation will now head to the Senate, independent MPs and the Coalition will now put more pressure on Senator Conroy to release the NBN business plan, which was delivered to the department by the NBN Co.

“I’m hopeful that the business plan’ll actually be out before the deliberations go through the Senate,” independent MP Tony Windsor told Lateline last night.

However, the news comes as Telstra shares have hit an all-time low of $2.55 due to the weak share market movement.

Macarthur Coal predicts increasing demand

Macarthur Coal has said demand is set to increase for its pulverised injection coal products in 2011, with China set to be the key player in a year that may see its profit triple.

The company said first half net profit after tax is forecast to be in the range of $115-125 million, based on 2.5-2.7 tonnes of sales. This compares to the 2009-10 first half profit of $39.6 million and a full-year profit of $125.1 million.

“We expect ageing coke ovens and blast furnace expansions to create stronger differential growth for LV PCI,” Macarthur chief financial officer Graham Yerbury said at a conference yesterday.

In Canberra, The Greens have said they will introduce a private members’ bill that will seek to stop banks from moving interest rates above and beyond changes to the official cash rate made by the RBA.

“I’m introducing a bill to clip the wings of the bank interest rates,” leader Bob Brown told reporters today. “It’s very unfair that some people are going broke because of increased bank interest rates.”

However, Westpac chief executive Gail Kelly has said she expects funding costs to stabilise in 2012 and interest rate increases above the RBA’s movements will become rarer.

“Some time in 2012 I would expect to see our wholesale funding rate stabilise,” Kelly told CNBC in the United States. She also denied any movement to gain exposure in the US market.

“That’s not on our agenda at all,” she said. “At the moment we are focused on a very organic growth agenda within Australia.”

Europe prepares for Irish rescue

European powers including the International Monetary Fund and Euro zone finance ministers are beginning to lay the groundwork for a possible rescue plan for Ireland’s debt problem.

Eurogroup chairman Jean-Claude Juncker has said the European Commission, European Central Bank and International Monetary Fund will hold discussions with the country in the coming days.

“The discussions that will take place between Ireland and the Commission and the ECB and the IMF will enable us to have at our disposal all the elements and instruments we need were Ireland to make a request for assistance to the EU, the IMF and the Eurogroup,” he told reporters.

“We confirm that we will take action as the Eurogroup…in a determined and coordinated manner to safeguard the financial stability of the euro area if that is needed.”

However, the discussions made investors in New York nervous, with the Dow Jones Industrial Average dropping 178 points or 1.59% to 11,023.50.