The SPI is pointing to a steep drop on the Australian market today after global markets fell following the announcement of new stimulus measures from the US Federal Reserve. Wall Street closed at session lows, dragged down by doubts over the potential effectiveness of the plan to tackle US debt and the Fed’s grim outlook for the economy.
US economic news
The US Federal Reserve announced what it calls, “Operation Twist”, which represents the central bank’s efforts to twist down long-term rates and boost lending. The Fed will move $US400 billion from short-term Treasuries into long-term Treasuries in an attempt to propel the economy through increasing lending. The Federal Open Market Committee made no change to its interest rate target, that currently sits between 0-0.25 per cent.
Lower house prices have pulled buyers back into the market. The National Association of Realtors reported that sales of existing homes grew more than expected in August - increasing 7.7 per cent to an annual rate of 5.03 million homes.
Figures
On Wednesday: The Dow Jones Industrial Average sank 284 points to close at 11,125. The S&P500 shed 35 points to close at 1,167. The NASDAQ retreated 52 points to close at 2,538.
European stocks closed lower: London’s FTSE was down 75 points, Paris was down 48 and Frankfurt was down 138.
To Asian markets, stocks closed mixed: Hong Kong’s Hang Seng down 191, Tokyo Nikkei was up 20 point and China’s Shanghai Composite was up 65 points.
The Australian share market ended a choppy day of trade 0.8 per cent higher yesterday: The S&P/ASX 200 Index recovered some losses to close 32 points higher at 4,072. On the futures market the SPI is down 105 points.
Currencies
The Australian Dollar at 7:40AM was buying $US1.0055 cents, 64.82 Pence Sterling, 76.86 Yen and 74.06 Euro cents.
Company news
Shares in Foster's Group Limited (ASX:FGL) finished 0.41 per cent lower yesterday at $4.89. Australia’s largest brewer, Foster’s, has surrendered to its suitors hostile bid and accepted SABMiller’s sweetened $12.3 billion takeover offer. Under the scheme of arrangement Foster’s shareholders will receive $5.5325 per share, a 13 per cent increase to the original cash offer. The Foster's board has unanimously backed the deal and UK-based SABMiller says it expects the takeover to be finalised before the end of the year. In the 2011 financial year Foster’s Group narrowed its net loss to $89 million.
Shares in Commonwealth Bank of Australia (ASX:CBA) lost 0.95 per cent yesterday, closing at $43.95. CBA’s chief financial officer, David Craig, says the bank, and Australia, are more prepared now to tackle the European debt crisis than before the global financial crisis. Mr Craig has told The Australian that almost 61 per cent of CBA’s funding is from its retail customer base, that he believes is only going to rise. Mr Craig also says that CBA doesn’t do a lot of European businesses and has been easing back. In the 2011 financial year Commonwealth Bank reported a net profit of $6.4 billion.
Ex-dividends
Four companies are going ex-dividend today: Credit Corp Group, Cadence Capital, Goodman Fielder, Mastermyne Group.
Among those coming up tomorrow: Count Financial, G8 Education, RHG.
Commodities
Gold is down $1.00 to $US1,808 an ounce for the December contract on Comex.
Silver is up $0.33 cents to $40.47.
Copper is up 4 cents at $3.76 a pound.
Oil is down $1.00 at $85.92 a barrel for October light crude in New York.
