Australian sharemarket market falls 4% after biggest fall on Wall Street since GFC: Midday Roundup

The Australian sharemarket has plummeted over 4.5% this morning, after the United States stock market suffered its worst one-day performance in over three years as investors remain nervous over the recent deal to pay down the country’s debt.

The benchmark S&P/ASX200 index was down 175 points or 4.01% to 4105.1 at 14.00 AEST, while the Australian dollar has dropped over two cents to $US1.04c.

Some of the biggest falls have been in the resources sector, although Linc Energy has suffered the worst performance of the day, down 15% to $2.21. AMP shares have fallen 5.24% to $3.98, while ANZ dropped 5.05% to $18.81.

Westpac shares fell 4.25% to $19.93 as NAB lost 5.07% to $21.52. Shares in Macquarie Bank have fallen 8%, with BHP also falling 5.2%. 

Markets worldwide have been reeling, with the FTSE MIB index suspended 30 minutes before closing overnight, after falling 5%. The FSTE 100 fell 3.43% to 5,393.14, while the DAX dropped 3.4% to 6,414.76.

Governments around the world have moved to stem rising levels of fear, with Japan even intervening to devalue its currency in the third time this year overnight. 

IG markets analyst Ben Potter has told Reuters that “it is going to be a very ugly end to an even uglier week”.

In the United States, the Dow Jones Industrial Average plummeted over 4.3% or 512 points to 11,383.

Treasurer Wayne Swan has moved to calm the markets, saying that Australia’s economy is stronger than those in Europe and North America.

“Australians should never forget that our economic credentials are among the strongest in the developed world,” he said this morning. “Australia has a proven track record of dealing with global economic uncertainty.”

“There is just a world of difference between the situation in Australia and the situation in Europe and the United States.”

Swan said Australia’s future was tied more to the Asia-Pacific region, saying the region had better prospects than either the United States or Europe. 

Reserve Bank cuts GDP outlook

The Reserve Bank has cut its outlook for GDP from 4.25% to 3.25% for the year in its latest statement on monetary policy, citing weaker than expected recoveries in Queensland after the state’s natural disasters.

However, the RBA has also said it expects domestic demand to experience a “large increase” in mining investment, and attributed about half the cut to conditions in the coal industry.

GDP growth in 2012 and 2013 is expected to remain on track or above trend, it said.

Tiger confirms commitment to Australia

Troubled airline Tiger Airways has confirmed it remains committed to Australia despite continuing to be probed by the aviation authority, having been grounded for the past month. The Civil Aviation Safety Authority has said it is still not satisfied with Tiger’s performance.

“At this point of time, given that we have no firm position on the date for resumption of services it would be premature to comment on what those relaunch plans are,” group chief executive Chin Yau Seng said.

“We believe there is money to be made in this segment and we remain committed to trying make it work.

“As to whether we have ever considered pulling the plug, we are nowhere close to that tipping point at this point in time.”

Construction industry edges up in July, but still downbeat: survey

The construction industry eked out a minor gain in July, but remains downbeat, a survey has found.

The Australian Industry Group Australian Performance of Construction Index, in conjunction with the Housing Industry Association, edged up 0.3 points to 36.1 last month, still well below the 50 points, which marks growth.

Peter Burn, Australian Industry Group director public policy, said the index shows a continuation of the “very poor run for the construction sector and the house building sub-sector in particular.”

“Consumer caution and the fear of further interest rate rises are dampening activity in residential construction. The commercial construction sub-sector is suffering as low levels of private sector activity are not making up for the withdrawal of government-backed projects. The decline in new orders gives little reason for the industry to think that a turnaround is in the wings.”