Sharemarket jumps, profit warnings continue, Aussie dollar set to plunge: Economy roundup

Australian investors have started the week on a positive note, with local shares climbing more than 2% despite growing evidence of an economic slowdown.

Australian investors have started the week on a positive note, with local shares climbing more than 2% despite growing evidence of an economic slowdown.

The benchmark S&P/ASX200 index jumped 2.8% or 111.4 points to 4082.2 at 12:10pm AEST. Mining stocks have led the market higher after being smashed last week, with BHP Billiton up 5% in early trade.

The major banks and big retailers such as Woolworths and Wesfarmers have also traded higher this morning.

But worrying signs continue to emerge about the state of the economy, with paint maker Wattyl revealing its sales in the three months to 30 September crashed 5.5% and warning its full 2008-09 year profit would be significantly lower than expected.

Qantas has also flagged tougher times ahead, with passenger numbers already falling across all travel classes.

The dollar has followed the market up this morning, rising 0.3% to US69c in early trade. But the dollar could be in for a bit of a battering, with Commonwealth Bank strategist Richard Grace predicting the Aussie will drop by as much as 15% in the next five months.

He believes the currency will drop to 59US¢ in the first quarter of 2009 as many of the world’s economies enter a period of recession.

”It’s unavoidable that the US and Europe go into recession, and probably Japan too, and Asia will slow. The world basically fell off a cliff and that’s what changed our forecast,” he told The Age.

”We’re going to continue to see downward revisions to global growth.”