Shares slide, US economy in reverse, Germany and Japan to launch stimulus packages: Economy roundup

The trading week looks set to finish on a down note, with the Australian sharemarket falling slightly this morning, despite a 2.5% rise on Wall Street last night.

The trading week looks set to finish on a down note, with the Australian sharemarket falling slightly this morning, despite a 2.5% rise on Wall Street last night.

The benchmark S&P/ASX200 index was down 1.4% or 55.9 points to 3945.2 at noon AEST.

The mining and banking sectors again came in for some selling, with BHP Billiton falling 3.7% and National Australia Bank dropping 3.3%. Beleaguered property company GPT fell 12%, while Rupert Murdoch’s News Corporation had a good morning, rising 8.5%.

The dollar also lost some ground. At 7.00am AEST, the dollar was trading down 0.9% from yesterday’s close at US67.99¢, and by 11.50am AEST had moved down again to US66.21¢.

Meanwhile, the news everyone has been expecting was finally confirmed last night; the US economy shrank 0.3% in the third quarter, the biggest contraction in seven years.

Wall Street enjoyed a good session overnight despite the announcement, with the Dow Jones Industrial Average managing to gain 189.73 points or 2.11% to 9180.69.

In another sign of the growing concerns about recession, the governments of Japan and Germany say they will pour billions into stimulus packages. Japan is also likely to cut rates today, while the European Central Bank may do the same when it meets next week.

The spending packages will likely emulate similar plans in both the US and Australia. There may also be measures to stimulate specific industries suffering under the downturn.

In a direct summary of the economic downturn, Japanese Prime Minister Taro Aso told a news conference: “A harsh storm seen only once in 100 years is raging.”