AUSTRALIAN shares have taken a battering today after European share markets plunged overnight on fears of a US recession with investors bracing for a global stock-market crash.
For local share investors, financial horror has firmly set in as their wealth washes away.
For retirees, their savings are shrinking as superannuation funds post huge losses, with yesterday's share market plunge wiping more than $40 billion from personal investors and superannuation funds.
And the losses are growing. In early trade today, the S&P/ASX200 had plunged 210 points by 10:12am AEDT to 5376.1, or down 3.7 per cent.
By 12 noon AEDT, the losses had mounted with the S&P/ASX200 down 5 per cent or 278.6 points to 5301.8.
The S&P/ASX200 so far this year has lost $146.9 billion of its value, with $32.8 billion alone lost yesterday. Panic, risk aversion and, increasingly, lenders' margin calls are behind the drop.
The benchmark S&P/ASX200 index is now down more than 20 per cent from its life high of 6851.5 reached in November 2007, indicating a slip into bear market territory.
A bear market is seen as a long period of falling prices marked by investor pessimism. It is often calculated as having begun when stocks fall 20 per cent from whatever peak they have hit during the recent cycle.
And the future is not bright in the world's biggest economy. While US markets were closed overnight for a holiday, US stock index futures were down sharply, suggesting investors were preparing to flee the US stock market when the market reopens later today.
The Australian stock market yesterday was in freefall for the 11th consecutive day - the All Ordinaries tumbled 168 points to 5630 points, down 2.9 per cent.
Of the 478 companies listed on the ASX, 333 fell and 45 were unchanged.
The local stock market collapse is the longest losing streak since January 1982 and yesterday was the All Ordinaries' worst day since this year’s fall began - wiping out the huge gains of 2007.
Global rout just begun
Iin Asia, investors too sold off stocks yesterday, carrying through from last week's concern on Wall Street that a $US150 billion ($174 billion) fiscal stimulus proposed by President George W. Bush would not be enough to stop a US recession.
To heighten fears of global financial doom, the IMF warned overnight the global financial outlook is dire.
The IMF Managing Director Dominique Strauss-Kahn said overnight all developed countries were suffering from the slowdown in the US putting the world economy in a serious situation.
European markets drop
His comments came after European stock markets fell sharply and demand for safe-haven bonds and currencies soared on fears a US recession, prompted by last year’s sub-prime mortgage crisis.
European stock markets posted losses of more than 5 per cent in many centres. In London, the FTSE 100 index plunged 5.48 per cent to 5578.20 points, the largest one day loss since September 11.
In Paris, the CAC 40 index lost 6.83 per cent to 4744,45 points and in Frankfurt the DAX shed 7.16 per cent to 6790.19 points, also the biggest single-day losses since the September 11 terror attacks.
Russian stocks tumbled more than 7 per cent by close of trading overnight in the knock-on effect from global financial woes that badly hit other bourses.
With AFP and Reuters
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