Shares fall more than 2%, Obama promises to halve US deficit: Economy roundup

It’s been an ugly start to the week for investors, with the Australian sharemarket dropping more than 2% as concerns about the state of the global banking system and company profits continue to weigh heavily.

The benchmark S&P/ASX200 index was down 83.9 points or 2.5% to 3318.5 at 12.10 AESDT, while the Australian dollar also gained ground to US64 cents.

Miners and banks struggled this morning in the sell-off. ANZ shares have dropped 2.3% to $12.16, while BHP Billiton lost 3.9% to $29.33. Commonwealth Bank shares have dropped 1.6% to $29.10.

The country’s third biggest iron ore miner, Fortescue Metals, has entered a trading halt as it prepared to raise an unspecified amount of capital.

A report in The Australian Financial Review claims the group will raise a minimum of $500 million, but a company spokesperson would not confirm the rumours.

Small caps show resilience

In good news for the technology sector, with Brisbane firm Data#3 recording a 16% leap in earnings before interest, tax, depreciation and amortisation to $5.9 million. Net profit after tax increased 9% to $4 million, while revenue jumped 46% to $230 million.

Dividends increased 11% to 20 cents. Managing director John Grant says the group is performing well despite harsh economic conditions.

“Our performance in this first half has once again been nothing short of excellent, particularly in the light of the external economic environment and its broad market impact.

“Looking forward to the second half, our view is framed by the potential impact of a much less predictable business environment on the traditional seasonality in our profit toward the second half, and even more pointedly toward the fourth quarter.”

Overseas, Wall Street investors are bracing for a tough week ahead after the Dow Jones Industrial Average dropped 6.2% to a six-year-low last week.

“We don’t care about anything but bank details at this point,” Robert Francello, head of equity trading for Apex Capital hedge fund told Reuters. “It’s all about bank details and a bank rescue.”

Obama’s budget rescue plan

US Government officials say President Barack Obama wants to halve the country’s deficit by 2013, according to Reuters.

The new President will unveil the plan to help push the budget into the black at a White House summit on fiscal responsibility tomorrow, and later in the week when his Administration presents its first budget.

“Most of the savings will come from winding down the war in Iraq, increased (tax) revenue from those making more than $US250,000 a year, and savings from making government work more efficiently and eliminating programs that do not work,” an unnamed official told Reuters.

Back home, Federal Treasurer Wayne Swan says the Australian Government will “enthusiastically” proceed with the emissions trading scheme, cutting down rumours the program would be scrapped.

“We think it balances the needs of industry with the needs of households,” he told Network Ten. “We strongly support this package, we’re going to take it through enthusiastically.”