Share rally, US employment surges, Germany in recession: Economy roundup

The rollercoaster shows no signs of slowing down. The Australian sharemarket has rallied more than 4% this morning after closing at a four-year low yesterday.

The rollercoaster shows no signs of slowing down. The Australian sharemarket has rallied more than 4% this morning after closing at a four-year low yesterday.

The benchmark S&P/ASX200 index was up 79.8 points or 2.16% to 3777.1 at 12.05pm AEDT, following a late rise on Wall Street.

Banks and miners rebounded after being flogged yesterday. BHP Billiton was a big winner, jumping 6.2% to $26.56, while NAB saw a 3.6% rise to $20.10. Woolworths also enjoyed a 3.2% rise to $28.54.

The dollar also rallied from yesterday’s low of $US63 cents, jumping to $US66 cents.

Overseas, Wall Street rebounded after three days of losses as investors began to pick up cheap stocks. The Dow Jones Industrial Average was up 552.59 points or 6.67% to 8835.25. Oil also enjoyed a 4% gain to $US58 a barrel.

But while American stocks rebounded, the economic news doesn’t get any better. New figures show the US is suffering a 25-year-high unemployment rate, after new claims for jobless benefits rose 32,000 last week to 516,000.

Meanwhile, Germany has officially slipped into recession after gross domestic product dropped 0.5% in the third quarter, after falling 0.4% the previous quarter.

“The German recession has begun in earnest and it’s very serious,” says Holger Schmieding, chief European economist at Bank of America in London. “It raises the risk of a German contraction of more than 1% next year, and we will have to revise down our forecast for the euro area as well.”

Back home, ANZ may be preparing to slash up to 3500 workers, according to a report from Fairfax newspapers. But a spokesperson has told Business Spectator any restructure will only affect less than 10% of the bank’s workforce.

“Although we have said we don’t expect the new structure to impact frontline roles, inevitably there will be an impact on roles in middle management,” he says.

NSW Premier Nathan Rees says his Government will work towards a budget surplus for next year, but he warns drastic spending cuts will be needed.

“We will turn NSW’s economy around,” Rees told Fairfax radio. “This is what this mini-budget sets us up for – a deficit in the first year. That’s regrettable, but that’s the situation – but subsequent to that, surpluses.”

His announcement comes as the state’s mini-budget reveals it will suffer a $1 billion deficit.