Market down as US giant stumbles

Australian markets have fallen sharply this morning following the announcement of a confidence sapping 12% fall in earnings by global corporate giant General Electric.

The S&P/ASX200 is down 2% on Friday’s close to 5332.1 at 12.15pm. The US Dow Jones Index fell to 2.04% to 12,325.42 on Friday.

The key reason behind the falls on both markets is an unexpectedly poor earnings announcement by engineering and finance monolith General Electric on Friday. It revealed first quarter earnings of $US4.4 billion, down 12% on the previous quarter, after previously predicting double digit growth.

Significantly, it was GE’s finance operations that took the biggest hit – earnings for its commercial finance unit dropped 20% and its GE Money consumer credit operation 19%.

The gloom experienced on markets over the past few days was also present at a G7 meeting of the world’s economic leaders in the US on the weekend.

Treasurer Wayne Swan has returned from the meeting more pessimistic about the global economic outlook and declaring changes may need to be made to the forthcoming federal budget.

The poor global outlook “will impact the whole environment in which we frame the budget”, Swan says.

“I can’t outline Treasury forecasts, but there’s no doubt it’s going to have a material impact in terms of slowing employment growth and slowing revenue,” Swan says.

The declining economic climate is clearly reflected in surprisingly weak new housing finance data released today.

The total value of housing loans in February fell by a big 7.1%, well below market expectations of a 0.5% rise. Loans for investment in housing fell 9.5% and owner occupier loans 6%.

The data takes into account the February interest rate rise and provides some evidence that the Reserve Bank of Australia’s campaign against inflation is biting.

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