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Shares in freefall amid fears of a global downturnBy staff writers and wires
January 18, 2008 02:30pm
The Australian

Bloodbath on markets continues

Is this when it all comes crashing down?

Live prices: See how your shares are doing at bottom of this article

THE Australian share market has made a grim start to the year.

The market continued to haemorrhage this morning, plunging 2.65 per cent in the first 15 minutes of trading amid growing fears of a US recession.

Were the US to slide into a recession it would trigger a global downturn that would affect worldwide markets and interest rates, including Australia's.

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Is this where it all starts crashing down?

Are you tightening your belt?

Share your thoughts through the comments box below.

--------------------------------------------------------------------------------

The slide has been spurred on by the banks' years of lending easy money coming back to haunt them, combined with a steady stream of economic data all pointing to a gathering storm.

Australia's share market is now in its tenth consecutive day of negative trading. It comes on the heels of another horror session in Wall Street overnight.

The Bush administration is preparing a massive stimulus package worth up to US$150 billion to help resuscitate the flagging economy, signalling that it now perceives a real threat to the economy.
Even the traditional safe haven of gold, which investors scrambled to over the holiday period, has been volatile with prices beginning to slide after its recent record highs.

By midday today the benchmark S&P/ASX200 index was down 2.17 per cent, the broader All Ordinaries had fallen 2.22 per cent. (Full share market report)

Overnight, the Dow Jones Industrial Average sank 2.46 per cent, the tech-heavy Nasdaq lost 1.86 per cent and the Standard & Poor's 500 fell 2.83 per cent.

The US outlook is bleak after the country’s major banks have reported multi-billion dollar losses following the sub-prime mortgage crisis.

The US Federal Reserve chairman Ben Bernanke further unsettled investors overnight with talk of pumping up to $US150 billion ($170 billion) into the US economy in a bid to stimulate growth.

"Ben Bernanke's comments on a potential economic stimulus package from Congress did little to instill confidence among traders," said Joseph Hargett at Schaeffer's Investment Research.

Al Goldman, at AG Edwards, said the prospect of recession was still the main fear for Wall Street.

"Concerns about a possible recession and its impact on corporate earnings remain the major problems overhanging investor emotions," he said.

"A recession, which we continue to believe is the most likely economic scenario, will have a big negative impact on corporate earnings."

Think first, sell later

CommSec equities analyst Juliana Roadley said the Australian sharemarket remained a good vehicle for retail investors and the the environment would also present some bargains.

"Everyone is in a panic mode ... they're not looking at the fundamentals,'' she said.

"The book value and the face value of (a lot) of companies listed on our exchange at the moment are well above the value of what they're being traded at.

"So the share price values are way below where they should be.''

Ms Roadley said that rather than panic, investors should look to ride out the troughs.

"Don't get panicked, don't sell out - you might have some really good assets there.

"OK, you're going to see a bit of a fall, you might lose six months worth of growth, or in some cases eight months worth of growth, but then you've got to buy back in.

"You've got to sell out and pay brokerage, then you've got to buy back into the market at a lower level.''

One bright spot for Australian consumers could be a stay in interest rate hikes.

The RBA has to keep inflation growth beneath 3 per cent - uncertain financial markets could dampen spending and ease inflationary pressures.

Official inflation data comes out next week.

AMP Capital chief economist Shane Oliver told The Australian a 25 basis point move by the RBA coupled with the average 15 basis point increase in variable home loan rates by banks recently would be too much for consumers.

"I think they (the RBA) will stay on hold,'' Dr Oliver said.

"The global economy is more of a factor than the RBA thought it was going to be last year. The downturn will have an impact on the Australian economy and it will dampen global inflation pressures,'' Dr Oliver said.

Live Prices: See How Your Shares Are Doing: http://www.news.com.au/business/markets

Link to this article: http://www.news.com.au/business/story/0,23636,23071103-462,00.html?from=...

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Shares in freefall amid fears of a global downturn
By staff writers and wires
January 18, 2008 05:12pm
The Australian

THE Australian share market has made a grim start to the year.

The market continued to haemorrhage this morning, plunging 2.65 per cent in the first 15 minutes of trading amid growing fears of a US recession.

Were the US to slide into a recession it would trigger a global downturn that would affect worldwide markets and interest rates, including Australia's.

--------------------------------------------------------------------------------

Is this where it all starts crashing down? Are you tightening your belt? Share your thoughts through the comments box below.

--------------------------------------------------------------------------------

The slide has been spurred on by the banks' years of lending easy money coming back to haunt them, combined with a steady stream of economic data all pointing to a gathering storm.

Australia's share market is now in its tenth consecutive day of negative trading. It comes on the heels of another horror session in Wall Street overnight.

The Bush administration is preparing a massive stimulus package worth up to US$150 billion to help resuscitate the flagging economy, signalling that it now perceives a real threat to the economy.
Even the traditional safe haven of gold, which investors scrambled to over the holiday period, has been volatile with prices beginning to slide after its recent record highs.

At close today the benchmark S&P/ASX200 index had fallen 0.84 per cent, the broader All Ordinaries had shed 0.98 per cent. (Full share market report)

Overnight, the Dow Jones Industrial Average sank 2.46 per cent, the tech-heavy Nasdaq lost 1.86 per cent and the Standard & Poor's 500 fell 2.83 per cent.

The US outlook is bleak after the country’s major banks have reported multi-billion dollar losses following the sub-prime mortgage crisis.

The US Federal Reserve chairman Ben Bernanke further unsettled investors overnight with talk of pumping up to $US150 billion ($170 billion) into the US economy in a bid to stimulate growth.

"Ben Bernanke's comments on a potential economic stimulus package from Congress did little to instill confidence among traders," said Joseph Hargett at Schaeffer's Investment Research.

Al Goldman, at AG Edwards, said the prospect of recession was still the main fear for Wall Street.

"Concerns about a possible recession and its impact on corporate earnings remain the major problems overhanging investor emotions," he said.

"A recession, which we continue to believe is the most likely economic scenario, will have a big negative impact on corporate earnings."

Think first, sell later

CommSec equities analyst Juliana Roadley said the Australian sharemarket remained a good vehicle for retail investors and the the environment would also present some bargains.

"Everyone is in a panic mode ... they're not looking at the fundamentals,'' she said.

"The book value and the face value of (a lot) of companies listed on our exchange at the moment are well above the value of what they're being traded at.

"So the share price values are way below where they should be.''

Ms Roadley said that rather than panic, investors should look to ride out the troughs.

"Don't get panicked, don't sell out - you might have some really good assets there.

"OK, you're going to see a bit of a fall, you might lose six months worth of growth, or in some cases eight months worth of growth, but then you've got to buy back in.

"You've got to sell out and pay brokerage, then you've got to buy back into the market at a lower level.''

One bright spot for Australian consumers could be a stay in interest rate hikes.

The RBA has to keep inflation growth beneath 3 per cent - uncertain financial markets could dampen spending and ease inflationary pressures.

Official inflation data comes out next week.

AMP Capital chief economist Shane Oliver told The Australian a 25 basis point move by the RBA coupled with the average 15 basis point increase in variable home loan rates by banks recently would be too much for consumers.

"I think they (the RBA) will stay on hold,'' Dr Oliver said.

"The global economy is more of a factor than the RBA thought it was going to be last year. The downturn will have an impact on the Australian economy and it will dampen global inflation pressures,'' Dr Oliver said.

Link to this article: http://www.news.com.au/business/story/0,23636,23071103-462,00.html?from=...