The Australian sharemarket has had a shocking morning, with both indices down on news the special debt reduction committee of US congress had failed to seal a deal on cutting Government debt.
At 11.35am, the S&P/ASX 200 was down 1% to 4122.54 and the All Ordinaries index was down 1% to 4192.5.
The committee was tasked with cutting US deficits by $US1.2 trillion over 10 years. The Dow Jones closed down 2.1% in response, and although Standard & Poor’s maintained its AA+ credit rating on the US, it said “downward pressure on the ratings could build” if caps don’t emerge.
The local market was also roiled by a warning from Moody’s about France’s AAA credit rating, and follows declines on the US and European markets.
Investors are seeing this situation as further evidence that “the lights are on but no one’s at home” when it comes to political leadership of the world’s major economies,” chief market analyst at CMC Markets Ric Spooner said.
“The market response to this inertia is to increase the risk premium built into asset values and to reduce forecasts for economic growth and company profits. In the US it seems increasingly likely that economic reform will be put on hold until at least 2013 following next year’s elections.”
Meanwhile, the Australian dollar is now buying 98.5944 USD, after reaching a six-week low.
The local dollar, one of the world’s most traded currencies, has traditionally been viewed as a “risky” currency.
ANZ this morning said the Australian dollar had the most to lose as repatriation gathers steam. “Domestic credit markets are trading poorly and the hurdle to further rate cut is lower than in New Zealand.”
Property group Centro has been placed in a trading halt ahead of the company’s vote to move to a new group structure.
Shareholders are set to vote on a proposed merger this morning that will see Centro Properties merged with Centro Retail Trust.
The company has been battered over the past few years following the financial crisis.
The float of QR National was a success, according to Queensland state treasurer Andrew Fraser, with shares rising from $2.55 to $3.46 at Monday’s close.
“For taxpayers, the 34% stake we retained at listing has grown in value by over $750 million from $2.1 billion to almost $2.9 billion,” Fraser said.
“It has outperformed the ASX 200 by 40%.”
Fraser also praised the reforms the Government put in place that led to the company’s listing.
“The reforms, which included the QR National transaction, saw capital-intensive commercial businesses no longer making a call on the public balance sheet,” Fraser said.
“No longer do the schools, roads and hospitals Queenslanders need have to compete for taxpayer funds with QR National’s investment needs, which are now met by the private sector, which profits from this investment.”
Hewlett-Packard has announced a devastating 91% decline in net income to $US239 million in the quarter ending October 31.
Revenue has fallen 3% to $US32.12 billion.
The company attributes the fall to charges and business restructuring coming after the appointment of new chief executive Meg Whitman.
However, some analysts aren’t worried, with Ticonderoga Securities analyst Brian White writing in a note that while the report is weak, the company still holds some of its appeal.
“HP has valuation on its side and expectations are low, however, we believe this turnaround story will take time to play out and the darkening macroeconomic environment is only likely to hinder this cause,” White wrote, according to Reuters.
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