$30 billion wiped off ASX: How the bear market could maul small businesses

Small businesses will be concerned about the broader impacts of the $30 billion wiped off the Australian Securities Exchange yesterday, a leading economist says.

Monday’s losses saw the S&P/ASX200 fall by 2% to 5066.2 points at the close of trade yesterday on the back of a poor showing from Wall Street.

On Saturday, the Dow Jones closed down 1.74%, falling 290.16 points to 16,384.58 points.

On Monday market analysts, such as chief market strategist at CMC Markets, Michael McCarthy, said the US Federal Reserve’s ‘no change’ decision was a trigger  for the share market to sell off locally.

US Fed Reserve chairman, Janet Yellen, acknowledged the decision to leave US rates untouched was due to jitters regarding China’s slowing economy and concerns about global market turmoil.

The volatility comes as one chief economist, National Australia Bank’s Ivan Colhoun, reporting back from a trip to the UK, Europe and the Middle East, described the “overwhelming negativity” surrounding the outlook for Australia’s economy.

He also said one foreign investor had called Australia’s economy “toast”.

Paul Bloxham, chief economist at HSBC, told SmartCompany this morning the sell-off yesterday followed a global downturn on Friday on the back of the US Fed’s decision

 “It left interest rates steady but at same time pointed out why there weren’t prepared to lift rates was partly because of global risks,” he says.

Bloxham says this in turn led to a sell-off in global equities.

“That’s what we’ve seen flow through to local markets yesterday,” he says.

Bloxham says the sell-off could affect Australian small businesses, as part of the overall impact on the broader Australian economy.

“In our view it’s not necessarily something that will dampen Australia’s economic performance,” he says.

Bloxham says the broader question here is whether the equity market is “signalling what’s going on in the broader economy or just increased volatility”.