Australian shares remain in doldrums

An unexpected drop in the unemployment rate failed to lift Australian shares out of the doldrums, while the Aussie dollar remained entrenched below 73 US cents.

The S&P/ASX200 benchmark index was down 47.8 points, or 0.8 per cent, to 5908.3 points at 1200 AEST on Thursday.

The All Ordinaries index fell 49.6 points, or 0.8 per cent, to 6097.3.

The Australian dollar fell to 72.70 US cents from 72.82 US cents just before the jobs figures, and compared with 73.16 US cents late on Wednesday.

The local market went into the jobs figures with a negative tone after a soft finish on Wall Street, where shares failed to follow through from earlier gains.

Market heavyweights like BHP were down 0.9 per cent to $36.65, while among the major banks the Commonwealth was down 0.5 per cent at $65.35 but Westpac rose 0.6 per cent to $16.86.

The unemployment rate unexpectedly fell to 6.8 per cent in August from 7.5 per cent in July as a further 111,000 people joined the workforce with the COVID-19 lockdown in Victoria not having as big an impact on the national result.

Economists had expected the jobless rate to rise to 7.7 per cent with the number of people in employment falling by 35,000. 

However, in its interim economic outlook, the Organisation for Economic Cooperation and Development now expects a slower recovery in 2021 for Australia after slumping into its first recession since the early 1990s.

It now predicts a smaller contraction of 4.1 per cent in 2020, compared to the five per cent contraction it forecast in June.

But for 2021 it now sees growth of just 2.5 per cent rather than 4.1 per cent. This is still below Australia’s long-run growth average of 2.75 per cent.

In the run-up to his October 6 budget, Treasurer Josh Frydenberg promised to do what is necessary to “cushion the blow” from the pandemic on the economy.

As expected the US Federal Reserve left its key interest rates unchanged after its two-day meeting and issued a slightly less dire outlook for US economic growth and unemployment this year.

But the central bank promised to keep policy accommodative for at least three years.

Reserve Bank of Austalia governor Philip Lowe has made a similar vow.

The S&P 500 lost 15.71 points or 0.5 per cent to 3,385.49. The Dow Jones Industrial average rose 36.78 points, or 0.1 per cent, to 28,032.38. The Nasdaq composite lost 139.85 points, or 1.3 per cent, to 11,050.47.

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