Sharemarket soars 5%, fixed mortgage rates slashed: Economy roundup

Talk about starting the week on a good note. Australia’s sharemarket has roared back to life this morning after the announcement of Kevin Rudd’s plan to guarantee bank deposits and a more co-ordinated bailout of banks by European governments.

Talk about starting the week on a good note. Australia’s sharemarket has roared back to life this morning after the announcement of Kevin Rudd’s plan to guarantee bank deposits and a more co-ordinated bailout of banks by European governments.

The benchmark S&P/ASX200 index soared around 5.7% in the first hour of trade as investors surged back into the market after Friday’s disastrous slump, when the market fell 8.3%.

At 12:20pm AEST the ASX200 was up 4.5%, or 179.5 points, at 4140.2 points. Bargain hunters have snapped up banking and mining stocks, with ANZ up a whopping 8.5% and BHP Billiton up 7%.

But while this morning’s rally will be welcomed by battered traders, the global economy remains dangerously positioned.

Josef Ackermann, chairman of the Institute of International Finance and CEO of Deutsche Bank, says the next 24 hours are crucial for stabalising the global economy. “Tonight, tomorrow morning, are very critical moments. I think we have to do whatever is needed to bring confidence back, even if it is a little artificial, with some state help and guarantees.”

Ackermann says stabilising the financial system will then allow regulators to come up with a more comprehensive plan for getting markets back on the road to recovery.

In more welcome news for homebuyers, both NAB and Westpac banks have slashed the rates for their fixed-rate home loans.

Westpac cut the rate for its one-year fixed rate loans by 1.1% to 7.19%. Four-year and five-year loans have been cut to the same level.

NAB has also cut its fixed home loan rates by 1.6%, dropping its one-year fixed rate to 7.29% and its two-year fixed mortgage rate to 6.99%. Its five-year fixed rate loan is now set at 7.39%