Australia ignores 'double-dip' fear
The Age
Saturday February 27, 2010
FEARS of a global "double dip" have been given fresh legs by more bad news from Europe and the US, but investors in Australian shares continue to shrug off the negative signs.In the latest development to spook markets, ratings agencies have warned that Greece's credit rating is under threat and the US has posted a slew of weak figures on lending, jobs and industrial activity.But while these signs sent northern-hemisphere markets lower on Thursday, the ASX 200 bucked their lead yesterday to rise 43.6 points, or 0.95 per cent, to 4637.7. The rise capped off an earnings season that underlined Australia's relatively strong global position, with analysts saying most results were above expectations.Yesterday's rise also highlighted another trend: the uneven recovery under way in the world economy. Economists increasingly say Asia and the region have strong prospects while Europe and the US face a weak outlook.On Thursday night, northern hemisphere markets fell sharply after Moody's warned of a possible downgrade on Greece, echoing similar comments from Standard & Poor's.The head of investment markets research at Colonial First State, Stephen Halmarick, said such a downgrade could prompt a sell-off in Greek bonds from European banks, which would worsen Greece's woes."If they get downgraded, then their funds are no longer eligible collateral for the European banking system," Mr Halmarick said.Not only would this raise Greece's financing costs, he said, it could also leave European banks exposed to losses from their Greek bond holdings.The other weak economic news from overseas this week came from the US. Jobless numbers and durable goods orders were worse than expected, and figures put bank lending at its lowest level in nearly 70 years."The recovery is going to be slow, grinding and volatile, rather than a straight line," Mr Halmarick said.Despite this, Australian investors are confident the economy can steer clear of the northern-hemisphere turmoil thanks to the strength of China.St George chief economist Justin Smirk said the fears had dragged the Australian dollar below US90 this week, but the economy's prospects remained strong. "It's adding to volatility, but it does not change the view that the Australian economy is on a strong growth path," Mr Smirk said.In a reflection of the economy's strength, more than two-thirds of 16 economists surveyed by AAP said the Reserve Bank was likely to raise interest rates from 3.75 per cent next Tuesday.QBE Insurance was one of the losers yesterday. Its shares fell $1.60, or 6.96 per cent, to $21.40 €” its worst close since mid-August 2009.ANZ rose 89, or 4 per cent, to $23.14 after delivering a solid first-quarter trading update that reinforced positive sentiment in the financial sector.Harvey Norman rose 6 to $3.83 after lifting first-half profit by 59.9 per cent. Woolworths rose $1.39, or 5.46 per cent, to $26.84 after announcing a $400 million share buyback.
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