Sharemarket edges higher, but strap in for a bumpy ride: Economy roundup

Australia’s sharemarket has edged above the crucial 5000 point barrier in morning trade, but don’t be fooled – share prices remain under severe pressure.

Australia’s sharemarket has edged above the crucial 5000 point barrier in morning trade, but don’t be fooled – share prices remain under severe pressure.

After five straight losing sessions, the benchmark S&P/ASX200 index rose 29.5 points to 5027.8 by midday AEST. Investors will be breathing a sigh of relief after the index fell 1.9% on Thursday to the lowest level since September 2006.

The big resources stocks such as BHP Billiton, Rio Tinto and Fortescue Mining were sold off heavily yesterday, but bargain hunters stepped in this morning to lift the market into positive territory.

But investors shouldn’t be celebrating just yet – the market environment is likely to remain extremely volatile in the coming months as nervous investors fret about the on-going impact of the credit crisis, higher oil and food prices and plummeting consumer confidence around the globe.

“We’ve still got the credit crisis, global growth slowing and inflation pressure emerging,” Greg Goodsell, equity strategist at ABN AMRO, told Reuters. “And all that makes for an uncertain outlook for equities.”

Overnight, new data showed that the US economy shed 62,000 jobs in June, making it the sixth straight month of losses and putting pressure on the Federal Reserve to cut rates. Orders of durable goods – which are seen as a key measure of business spending – fell 0.4% during May.

Locally, more signs emerged that a slowdown is well and truly underway. Mortgage broker Australian Finance Group, which accounts for 10% of the national market, declared Australia was in “mortgage recession” following two consecutive quarters of falling sales. The number of mortgages the company sold in June fell 22% on sales in June 2007.