Australian market calms after ratings cut shock

The dollar was trading at around half a US cent lower at noon, as news of America's credit rating downgrade caused traders to take less risky investments.

AEST today, the Australian dollar was trading at 103.94 US cents, down from 104.42 cents on Friday.

Standard and Poor's says its downgrading of the US credit rating will have no immediate impact on Asia-Pacific sovereign ratings, but could have negative consequences over the long-term.

S&P says the downgrade, together with weakening sovereign creditworthiness in Europe, points to an increasingly uncertain and challenging environment ahead.

The share market had clawed back some losses at noon.

AEST, the benchmark S&P/ASX200 index was down 32.6 points, or 0.79 per cent, at 4,072.8 points, while the broader All Ordinaries index had backtracked 24.6 points, or 0.59 per cent, to 4,145.1 points.

On the ASX 24, the September share price index futures contract was down 17 points at 4,033 points with 48,575 contracts traded.

CommSec market analyst Juliette Saly said the domestic share market reacted with shock to US government debt being downgraded by ratings agency Standard and Poor's from AAA to AA+.

Following the huge losses on global sharemarkets last week amid concern about the strength of the US economic recovery and debt problems in Europe, interest rate futures today point to a rate cut in September.

Across the region, Japan's Nikkei 225 index was off 1.1 per cent in recent trade while New Zealand's top 50 index was off 3 per cent.

Hopes for a bounce on the local sharemarket after the Friday's horror were dashed after Standard and Poor's downgraded United States government debt from AAA to AA+, largely because of the failure of US leaders to reach a consensus on containing the country's spiralling debt.

But Treasurer Wayne Swan said Australia’s economy was in good shape and could cope with the worst the world can throw at it.

‘‘There is not a G20 finance minister who wouldn’t swap places with me in the environment we are in at the moment,’’ he said this morning.

Mr Swan said it was too early make a judgment that the world was facing a second financial crisis. ‘‘We will cross that bridge if we come to it."

Some opportunities seen

CommSec market analyst Juliette Saly said the domestic share market reacted with shock to US government debt being downgraded.

‘‘But investors seem to have calmed down a bit this morning after we saw an initial sellout,’’ Ms Saly said.

Gold stocks fared well after the price of the precious metal hit a new record high of $US1699.70 per ounce, up from $US1651.80 on Friday.

Among gold producers, AngloGold Ashanti was up 9 cents, or 1.1 per cent, at $8.03, Eldorado Gold Corp had added 37 cents, or 2.2 per cent, to $16.97 and Newcrest was 20 cents firmer at $39.40.

Ms Saly said positive corporate news helped to boost the market. Bendigo and Adelaide Bank reported a 41 per cent increase in full year net profit to $342.1 million, but said it expects the market to remain volatile in the period ahead. Shares in the bank were up 9 cents, or 1.12 per cent, at $8.16.

While JB Hi-Fi posted a fall in 2010-11 net profit to $109.70 million, from $118.65 million for the previous financial year, it revealed plans to expand.

‘‘It’s going to open 16 new stores across 2012 and also the dividend they paid to shareholders looked okay, so JB Hi-Fi is bucking the trend in the retail space,’’ Ms Saly said.

JB Hi-Fi shares were up 12 cents at $14.47.