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Throw another shrimp on the barbee, as they say in Australia. Or do they?

$55 billion wiped off Aussie sharemarket

The Australian sharemarket lost as much as $55 billion as fears of another global financial crisis spooked investors

The Australian sharemarket lost as much as $55 billion in its worst day in two years as fears of another global financial crisis spooked investors.

The Australian dollar is also heading for its worst week since May 2010 when fears of European sovereign debt default first emerged, the Sydney Morning Herald reports.

It has lost about six US cents in a week, falling to as low as US1.0425 earlier today.

Australia's Reserve Bank also cut its growth forecast for the economy this year.

The view, contained in the bank's latest quarterly update, prompted investors to increase bets the RBA will cut its interest rate next month, rating the change of a 50-basis-point cut as about a 50-50 chance. The cash rate may be as low as 3.5 per cent in a year's time, from 4.75 per cent now, according to Credit Suisse data.

“Conditions are expected to remain very strong in the mining industry, as well as those parts of the economy benefiting from high rates of resource-sector investment,” the central bank said today in its quarterly monetary policy statement.

“In other sectors, the high exchange rate and subdued levels of retail spending mean that the trading environment is likely to remain difficult.”

The RBA forecast growth in 2011 will average 2 per cent, down from its May 6 estimate of 3.25 per cent. In 2012, gross domestic product will accelerate 4.5 per cent, stronger than the prior estimate for a 4.25 per cent expansion.

Consumer prices will rise 3.5 per cent in the year through to the final quarter of 2011, from a previous prediction of 3.25 per cent, and core inflation will quicken to 3.25 per cent from 3 per cent, it said. The RBA said underlying inflation will remain “relatively high” in 2012 and 2013, SMH reports.

The sharemarket had begun to stabilize by the early afternoon of Friday local time, after slipping four per cent from opening, the Australian reports.

The news comes as stocks also plunge in the U.S., driving the Standard & Poor's 500 Index to the biggest nine-day decline since the equity bull market began in March 2009.

 

 

http://www.globalpost.com/dispatches/globalpost-blogs/down-under/60b-wiped-aussie-sharemarket

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