Midday: Aus shares slump under 4000

Market Reports

Hit with weak overseas leads the Australian share market dropped more than 2 per cent at open, with the S&P/ASX200 slumping under the psychological 4000 index level. Sentiment has been stung by the US Federal Reserve’s bleary outlook for the US economy and plans to tackle debt. Most sectors are steeply lower, with the miners and energy stocks fairing the worst. 

The S&P/ASX200 index has dropped 89 points slumping to 3,983 at noon. On the futures market the SPI is down 92 points.

US economic news

Investors have not responded well to the US Federal Reserve’s “Operation Twist”, in which it plans to twist down long-term rates to encourage lending. The Fed has announced it will transfer $US400 billion from short-term Treasuries into long-term Treasuries in an effort to boost the economy. The Fed also warned that there were significant downside risks to the US economic outlook.

Australian economic news

Westpac Banking Corporation (ASX:WBC) says its latest survey with the Australian Chamber of Commerce and Industry confirms its calls for a rate cut. The survey's main Actual Composite Index fell to 47.7 in September, down 1.2 points from June and representing the second quarter of contraction. The outlook for general business conditions fell to a net balance of –30, sinking from –9 in June and a read of 25 in March.

S&P/ASX200 best and worst performers

Shares in Foster's Group Limited (ASX:FGL) jumped to a three-year high after formally announcing it will recommend UK-based SABMiller’s sweetened $12 billion takeover bid. Perpetual Investments, that holds around a 3 per cent stake in Foster’s, has also today said it plans on backing the deal. Foster’s chairman David Crawford has urged shareholders to accept what he describes as a compelling offer of $5.5325 per share. Mr Crawford says the offer delivers certain cash proceeds in an uncertain global environment with high equity market volatility. Shares in Foster's Group have jumped 7.77 per cent and are trading at $5.27.

Shares in Kagara Limited (ASX:KZL) have shed 12 per cent after the mineral explorer unveiled plans to sell its Lounge Lizard nickel asset in Western Australia. Kagara announced yesterday that it will offload the non-core asset as part of five-year plan to address the company’s disappointing performance. The target price tag for the Lounge Lizard tenements has not been disclosed but Karaga is understood to have invested up to $60 million in acquiring and developing the asset. Shares in Kagara have shed 11 per cent and are trading at $0.445.

Sectors and stocks

The best performing sector is Consumer Staples firming 10 points to 7,409. Shares in Foster’s Group have advanced 7.77 per cent and trading at $5.27. Shares in Coca-Cola Amatil are higher while shares in Woolworths have dipped.

The worst performing sector is Materials, shedding 406 to 11,355. Shares in Kagara have sunk 11 per cent and trading at $0.445. Shares in Lynas Corporation and Rio Tinto have also fallen heavily.

IPOs

Coal explorer Baru Resources Limited (ASX:BAC) listed at $0.20, opened at $0.19, and is currently trading at $0.19.

New Zealand

The NZSX50 has fallen 9 points. Taking a look at the top four stocks by turnover, Vital Health Care at the top of the list, the stock 1.77 per cent higher at $1.15 followed by Westpac, Telecom Corporation of New Zealand and Fletcher Building.

Gold and the dollar

Gold is trading at $US1,776 an ounce. The Australian dollar is buying $US1.00.73 cents.