Market waits for rate cut, business conditions worsen, Europe in recession: Economy roundup

Productivity may slow this afternoon for the Melbourne Cup, but the Reserve Bank will still be hard at work.

Productivity may slow this afternoon for the Melbourne Cup, but the Reserve Bank will still be hard at work.

Falling inflation rates, retail sales and job advertisements all point to a third consecutive interest rate cut, with experts predicting a 0.5% drop to 5.5%, the lowest level since May 2006.

The latest business expectations survey from the Australian Chamber of Commerce and Industry and the Commonwealth Bank has added weight to a likely rate cut, with the indicators for economic conditions and business confidence at the lowest level for 16 years.

The indicators for sales, profits, employment and investment all plunged.

The sharemarket had a disappointing morning ahead of the likely rate cut. At 11.50am AEST, the benchmark S&P/ASX200 index had dropped 80.6 points or 1.9% to 4140.9.

The winners of the morning were Westpac, rising 2.5%, and ANZ with a modest 0.7% lift. Many major shares have lost ground, with Newscorp suffering a drop of 3.7%, while BHP also fell 2.7%.

The Aussie dollar also fell, dropping to US67c by 9.30am AEST.

American markets did little better overnight, with the Dow Jones Industrial Average falling 31.3 points or 0.34% to 9293.71. Oil prices also took a hit, falling $US3.90 or 6% to $US63.91 a barrel.

Meanwhile, the European Commission’s announcement it was officially in recession did little to settle fears of a worsening global crisis.

According to the commission’s forecasts, growth in the Euro Zone economy retracted 0.2% in the second quarter, and will likely contact by 0.1% in the third and fourth quarters.

“The economic horizon has now significantly darkened as the European Union economy is hit by the financial crisis that deepened during the autumn and is taking a toll on business and consumer confidence,” EU economic affairs commissioner Joaquin Almunia says.

 

Trending

COMMENTS

Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments