Australasian Investment Review

It was a big week last week for the Australian banking, property and infrastructure groups and commodity sectors. Major banks and property groups updated the market, from the Commonwealth, to Macquarie, the ANZ, Mirvac, Suncorp and Westfield. Lend Lease joined Westfield in raising fresh capital and confirming big write-downs.

Shareholders in struggling Brisbane-based financial services group, Suncorp Metway, face a further loss of value of up to $2 billion or more after the most eventful day in the group's history yesterday The future independence of Brisbane-based Suncorp Metway has been left in doubt after it revealed a sharp drop in profit, more than halved its dividend, revealed ambitions to raise about $900 million by selling new shares and the departure of chief executive, John Mulcahy.

And there were echoes of that US economists' survey in some of the new forecasts and commentary from the National Australia Bank about the coming year. In its first report of 2009 the National Australia Bank downgraded Australia's economic outlook, forecasting a shallow recession, a sharper rise in unemployment, official interest rates cut to 2.5% in the September quarter and a budget deficit hitting $40 billion next year.

The country's biggest listed investment company, Australian Foundation Investment Company (AFI), has taken a different approach to the market than some of its associates, such as Djerriwarrh Investments (DJW) which basically stayed out of the market in the December quarter.

There seems to have been a rapid shift in sentiment in the oil market towards a belief that supply-demand might be moving into balance faster than expected. Crude oil prices hit a two week high last week and the differential in New York compared with London's Brent crude eased...

So with the credit crunch and economic slump still with us, oil still sliding (and giving confusing pricing signals) what will gold do this year? The inflation bears look at all the government debt and say, it's good news for us, even though price deflation is more likely than an upturn in price inflation. The strength of the slump is too strong and economies from Australia, to the US, Japan and Europe, are still feeling the pinch and will go on doing so for months to come...

The Australian Financial Review had a front page story yesterday headlined "Dividends hit as asset values plunge", It started "Shareholder dividends will come under increased pressure this reporting season as large companies are forced to write-off billions of dollars in goodwill built up over a decade-long merger acquisitions boom" That opening paragraph should be a warning signal to readers about the rest of the story....

Global recession is now a given. Australia is also headed for at least a mild recession. The key issue is the depth and duration of the slump. At the moment, leading indicators for global and Australian growth are still in free fall...

Once again nothing was spared in last week's selling crunch. Shares, currencies and commodities were either pounded or pursued, such as the yen and the greenback. Major commodity indices told the story in that sector: the Standard & Poor's GSCI Index - which tracks the prices of two dozen raw materials including wheat, corn, sugar, copper and lead - has dropped nearly 29% from the start of the month...

Cars, planes, retailing, engineering, food and building groups around the world cut earnings forecasts, production or jobs on Friday in one of the gloomiest days of the year so far for earnings and stockmarket confidence. And there will be more of the same this week...