The service sector contracted for a fourth consecutive month in August, according to the latest figures released by the Australian Industry Group-Commonwealth Bank performance of services index.
The index rose by 0.9 points to 47.5, but this is still below the 50-point level separating expansion from contraction.
The survey’s measure of sales grew by 7.4 to 51.8 with six sectors reporting growth, and new orders rose 0.9 points, but the employment index fell by 3.4 points to 47. Senior CBA economist John Peters, however, said spending still remains strong.
“We think that households, buoyed by ongoing labour market strength, a falling unemployment rate, and gifted with real wage increases, and likely rising asset prices in the year ahead, will become more confident and relaxed about the future,” he said.
“They will thus become increasingly less jittery about balance sheet repair, and will boost their spending levels and the breadth of their purchases.”
Pharmaceutical group Nufarm is now facing a class action from shareholders regarding a profit downgrade announced earlier this year.
Law firm Slater & Gordon has said it has been approached by shareholders, following the company’s announcement earlier this year which sent shares plummeting.
“The proposed class action will allege that Nufarm engaged in misleading or deceptive conduct when it provided its profit guidance on 2 March 2010, and breached its continuous disclosure obligations throughout the period,” Slater & Gordon said.
Meanwhile, Telstra has announced its Chinese subsidiary SouFun Holdings has applied for an IPO with the US Securities and Exchange Commission. The IPO will value the group at $US810 million to $US850 million.
Sources have told Reuters previously Deutsche Bank, JPMorgan Chase & Co, Bank of America Merrill Lynch and UBS AG have been working on the proposal.
The Australian sharemarket has opened higher today following a solid night in overseas markets, following a strong performance on Wall Street yesterday.
The benchmark S&P/ASX200 index was up 11 points or 0.24% to 4543.7 at 12.25 AEST, while the Australian dollar also opened higher to US91c.
Commonwealth Bank shares lost 0.8% to $51.53, while NAB shares lost 0.9% to $23.90. Westpac lost 0.9% to $22.44 as ANZ fell 1% to $23.20.
Meanwhile, as reported by The Australian, BHP Billiton is reportedly working on a major oil and gas purchase – which could be directed at the Anadarko Petroleum Corporation.
According to a “senior energy figure”, the company will seek to purchase Anadarko which has a market capitalisation of about $26 billion.
In the mining sector, Fortescue Metals has denied allegations it breached a funding agreement with shareholder Leucadia National, saying future funding is not dependent on the outcome of a legal process.
Leucadia has issued a writ of summons against Fortescue and chief Andrew Forrest, saying it must do so in order to protect a $110 million subordinated note.
News Corp chief executive Rupert Murdoch has warned the global economy is still volatile and the media industry is in a state of flux.
“I do not believe we are out of the turmoil yet. Sovereign debt pressures, soaring deficits and unacceptable US unemployment levels are key obstacles to the global economic recovery,” Murdoch said in a letter to shareholders.
“Others may see more positive signs, but I believe until these issues are addressed, markets, governments, currencies and consumer behaviour will be unpredictable,” he said.
However, Murdoch said his company is performing well, especially given the success of 3D blockbuster Avatar over the last year. “I am only half joking when I wonder if there is anyone left on this planet who has yet to see Avatar,” he said.
He also addressed the company’s decision to spread content on Apple devices like the iPad and upcoming Apple TV, saying “companies that do not innovate will struggle to survive”.
Wall Street stocks rose after the National Association of Realtors released results showing home resales rose higher than expected during July. The Dow Jones Industrial Average gained 50.63 points, or 0.49%, to 10,320.10
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
