Australian sharemarket loses $38 billion in horror morning: Economy roundup

Panic has taken hold of the Australian sharemarket this morning as concerns about the stability of global financial markets wiped $38 billion off the value of the Australian sharemarket in a horror morning of trade.

Panic has taken hold of the Australian sharemarket this morning as concerns about the stability of global financial markets wiped $38 billion off the value of the Australian sharemarket in a horror morning of trade.

At midday AEST the benchmark S&P/ASX200 index was down 3.3%, or 155.9 points, at 4666.3.

Not surprisingly, financial stocks were hit hardest, with Macquarie Group down a whopping 16% to $28.50, after losing 7.8% yesterday.

Despite the company’s announcement last night that is it fundamentally sound, it appears investors are concerned about the company’s debt levels and exposure to the Wall Street crisis. Macquarie told the Australian Stock Exchange this morning that it was not aware of any reason for the big fall in its shares.

Investment bank Babcock & Brown has also been sold off sharply, losing 18.5%. Its stock has now fallen from $20 a share to just 75c since the start of the year.

The big four banks – ANZ, Commonwealth Bank, National Australia Bank and Westpac – have lost between 2.5% and 3% this morning, while AMP is down 4%.

Gold miners have defied the gloom. As often happens in a downturn, investors are flocking to the safe haven of gold to protect their portfolios; spot gold prices surged 10% in overnight trade and are up 1.1% this morning.

Funeral company InvoCare Ltd also gained.

“The market’s not taking prisoners at the moment,” Michael Heffernan, senior client adviser at Austock Securities, told Reuters this morning. “Gold and funerals are the way to go at the moment.”

The mood of the market was not helped by news that Lloyds had agreed to buy struggling rival HBOS for £12 billion, creating a £28 billion giant.

HBOS, Britain’s largest home lender, has lost half its value in six days as a result of the Wall Street crisis. The bank is extremely reliant on wholesale funding and banks have simply stopped lending to each other.

It was another horror night on Wall Street too, with the Dow Jones Industrial Average slumping 4.06%, or 449.36 points, to finish at 10,609.66.

See also: What the Wall Street crises means for the Australian economy, interest rates and SMEs