The Australian share market opened slightly higher today ahead of the news that the nation’s economy grew by 0.4%, avoiding a recession.
The benchmark S&P/ASX200 index was up 23.8 points or 0.6% to 3,979.1 at 12.15 AEST. The Australian dollar also rose to an eight-month high of 82 US cents.
Commonwealth Bank shares have gained 0.6% to $36.55, while ANZ dropped 1% to $15.82. Westpac rose 0.3% to $18.82 as AMP also gained 0.2% to $5.04.
The Government has said that it will not offer automaker Holden any assistance if it follows its parent company General Motors into bankruptcy.
“The reorganisation of General Motors announced overnight will have no direct impact on Holden, its workers or its suppliers,” Industry Minister Senator Kim Carr told reporters on Tuesday.
Carr said the company was “effectively self-contained” and that “the operations in this country are separate from what occurs in other parts, and are very different from other parts of the world”.
Meanwhile, the Australian Industry Group-Commonwealth Bank Performance of Services Index remained stable during May at 39.9 points, gaining just a seasonally adjusted 0.1 from April.
Accommodation, cafes and restaurants, communication services, and health and community services sectors helped the index grow, the accompanying report said.
“While conditions remain soft in the services sector, important sub-sectors showed a slowing in the pace of decline in May,” Australian Industry Group (Ai Group) chief executive, Heather Ridout, said in a statement.
“While the steeper pace of decline in retail activity was disappointing, it continues the seesawing pattern of the PSI results in this sub-sector in recent months.”
Meanwhile, the Treasury has defended its official forecasts for GDP to grow 2.25% during 2010-11, followed by 4.5% during 2011-12. The defense comes as the International Monetary Fund releases forecasts expecting only 1.1% growth in the calendar 2010 year.
“I remain puzzled by the IMF forecasts. They were put together before the budget, so they don’t include measures from the budget,” Treasury’s director of macro-economics, David Gruen, told a parliamentary hearing today.
Overseas, Wall Street rose on news that pending sales of existing homes increased by 6.7% during April in the biggest monthly gain in seven years, according to the National Association of Realtors.
The Dow Jones Industrial Average gained 19.43 points or 0.22% to 8,740.87.
Meanwhile, the Bank of America, JPMorgan Chase & Co and other large banks have raised more than US$19 billion in capital to show the White House they can function without Government support, and reduce public ownership in the companies.
The capital raisings come ahead of an announcement by the Federal Reserve next week that will detail which of the 19 banks that underwent Government ‘stress tests’ last week can repay Government bailout funding.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
