The Australian share market may open slightly higher today, as Wall Street closed modestly lower overnight after the US Central Bank took a cautious stance about the recovery.
The Federal Reserve left short-term interest rates unchanged in a range between 0% and 0.25%, and gave its most bearish outlook in more than a year, saying the economic recovery is weakening.
The Fed also said it plans to reinvest its debt into longer-term Treasury securities – sparking concerns about deflation.
Looking closer at the economy: a Labor Department report said business productivity, which measures employee output by the hour, fell by 0.9% in the June quarter. It was the first decline in 18 months as the number of hours worked increased.
And a separate report showed wholesale inventories fell 0.7% in June, from a 0.5% hike in May. Economists expected an increase of 0.4% during the month.
Tuesday on Wall Street, the Dow Jones Industrial Average closed down 55 points to 10,644. The S&P 500 Index fell 7 points at 1,121 and the NASDAQ shed 29 points at 2,277.
European stocks were lower; London’s FTSE fell 34 points, Paris dropped 47 and Frankfurt is down 65.
Asian markets were weaker: Hong Kong’s Hang Seng plunged 328 points, Tokyo’s Nikkei down 21 points and China’s Shanghai Composite fell 77 points.
The Australian share market finished lower on Tuesday influenced by news that China’s imports grew less than expected. The S&P/ASX 200 Index closed down 54 points at 4,541 and on the futures market the SPI200 is up 4 points. The Aussie Dollar at 7:30AM was down against the major currencies and was buying 91.34 US cents, 57.61 Pence Sterling, 78.05 Yen and 69.31 Euro cents.
In local economic news being released today: ABS Labour force data for July is coming out, plus the Melbourne Institute Survey of Consumer Inflationary Expectations and the Westpac-Melbourne Institute Survey of Consumer Unemployment Expectations for August. And the Reserve Bank also releases its Credit and Debit card data for June.
In business news: Shares in Telstra (ASX:TLS) closed 1.8% lower yesterday to $3.27. Telstra could be spared of a costly structural separation, should Tony Abbott win at the Election on 21 August. The Federal Opposition’s telecommunications policy announced yesterday is a massive cost downsize to Labor’s proposed $43 billion National Broadband Network – which would see the building of a new fibre optic network whilst slowing phasing out Telstra’s dual role as wholesale and retail provider. But under the Coalition, Telstra will be left alone and the project will use a mix of wire-less revamped copper wire and existing pay TV and telecommunication cables and would only cost $6.3 billion. Telstra reported a net profit of just over $4 billion in 2009.
Shares in National Australia Bank (ASX:NAB finished 2.2% lower yesterday to $24.50. National Australia Bank has effectively ruled out a near-term increase in its mortgage rates, pressuring its rivals also to hold steady. As the bank reported a 22% increase in third-quarter cash earnings to $1.1 billion yesterday, NAB chief executive Cameron Clyne promised to continue to price home loans at a discount to the other big lenders. He also gave the strongest sign yet that NAB was prepared to avoid out-of-cycle rate increases, saying that while NAB watch its wholesale borrowing costs, there aren’t any immediate plans to change the bank’s current settings. National Australia Bank posted a profit of $2.5 billion for the year to 30 September 2009.
Going ex-dividend today, Advanced Share Registry with a 1.85 cent fully franked dividend. Navitas with 10.7 cent fully franked and Rio Tinto which is paying a healthy 49.27 cent fully franked dividend.
To commodities, and the price of gold fell overnight, dropping $4.50 to US$1,196 an ounce for the August contract on Comex. Silver is down $0.08 cents to US$18.15 and copper shed $0.04 at $3.31 a pound.
The price of oil is down $1.23 to US$80.25 a barrel for September light crude in New York.
