Warren Buffett’s vote of confidence, bale-out negotiations drag on: Economy roundup

Investors around the world take heart – the most famous investor on the globe, Warren Buffett, thinks its safe enough to start investing again.

Investors around the world take heart – the most famous investor on the globe, Warren Buffett, thinks its safe enough to start investing again.

Last night Buffett’s investment company Berkshire Hathaway confirmed it will pay around $6 billion for a stake in struggling investment bank Goldman Sachs. The 139-year-old investment bank will use the much-needed capital injection to shore up its balance sheet.

News that the Oracle of Omaha (as Buffet is affectionately known) is back in the market was taken as a sign that other wealthy investors might also be up for a spot of bargain hunting, although none have emerged quite yet.

That cheered US investors overnight, with the Dow Jones Industrial Average falling only 29 points, or 0.27% to 10,825.17.

But investors around the globe remain concerned about the status of US Treasury Secretary Henry Paulson’s $US700 million bale-out.

Overnight, US President George W Bush used a national address to tell the public that markets are no longer functioning properly and the economy would face recession without the bale-out. Even Prime Minister Kevin Rudd, who is in New York, joined the chorus of worried politicians urging the US Congress to pass the package and let the great rescue begin.

This morning, reports are emerging the Paulson has agreed to demands from Democrat legislators that the salaries of executives at those firms assisted by the bale-out be limited. Democrats and Republicans are now expected to meet tonight to draft a final bipartisan Wall Street bale-out bill.

The Australian market has been subdued this morning, with the benchmark S&P/ASX200 index falling just 0.3% to 4965.4 points at 11:50am AEST.

The biggest corporate news came from the Commonwealth Bank, which says it cannot guarantee it will pass on future RBA rate cuts to customers because it is facing increased funding costs.