$100 billion sliced off stocks in a week

STOCKS plunged into a sea of red yesterday as fears of a US recession and the European debt crisis ravaged global equity markets.

By InvestSMART · 6 Aug 2011

By InvestSMART ·
6 Aug 2011

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STOCKS plunged into a sea of red yesterday as fears of a US recession and the European debt crisis ravaged global equity markets.

The fall wiped almost $60 billion from the value of shares and took the loss for the week to about

$100 billion.

Australian traders followed the overnight lead of the US, where the Dow Jones Industrial Average dived 512 points, or 4.3 per cent its biggest one-day drop in more than two years.

European markets were also

battered in early trading last night.

The S&P/ASX 200 Index finished down 171.1 points, or 4 per cent, at 4105.4, the biggest percentage fall since November 2008, at the height of the global financial crisis.

Platypus Asset Management chief investment officer Donald Williams said sovereign-debt problems in Europe and prolonged negotiations over the US debt ceiling had culminated in yesterday's selloff and would continue to weigh on the market.

"The drawn-out resolution in the US has affected sentiment," he said. "I don't think anyone truly believes the European issues went away just because Greece got a new debt package."

The energy sector was the poorest performer, losing 5.6 per cent, while the materials index fell 5.2 per cent. Woodside plummeted $1.95, or 5.3 per cent, to $34.55. Santos fell 82?, or 6.7 per cent, to $11.52 and Origin Energy dropped 43?, or 3.1 per cent, to $13.66.

Rio Tinto lost $4.58, or 6 per cent, to $72, a day after posting a record $7.3 billion half-year underlying net profit. BHP Billiton, finished down $1.94, or 4.8 per cent, at $38.12.

The financial sector dropped

3.9 per cent and the big four banks were all hit, ANZ losing 71? to $19.10, NAB 90? to $21.77, Westpac 50? at $19.27 and CBA $1.29 to $46.26. Macquarie Group dropped $1.80, or 7.2 per cent, to $23.25.

Gold, regarded as a haven during financial crises, closed down $US5.69 from Thursday's close at $US1657.61 an ounce. It was well up, however, from its overnight low of $US1640.40. Newcrest Mining fell $1.45, or 3.6 per cent, to $39.20.

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Frequently Asked Questions about this Article…

Why did Australian shares plunge this week?

Australian shares plunged largely because of growing fears of a US recession, renewed concerns about the European sovereign-debt crisis and drawn-out negotiations over the US debt ceiling. Market commentators in the article said those global issues dented investor sentiment and triggered the broad sell-off.

How much market value was wiped off shares during the sell-off?

The fall wiped almost $60 billion off the value of shares in a single session and took the loss for the week to about $100 billion, according to the article.

How badly did the main indexes fall (ASX 200 and US Dow)?

The S&P/ASX 200 Index finished down 171.1 points, or 4%, at 4,105.4 — its biggest percentage fall since November 2008. In the US the Dow Jones Industrial Average dived 512 points, or about 4.3%, marking its biggest one-day drop in more than two years.

Which sectors were hit hardest in the market sell-off?

The energy sector was the weakest, losing 5.6%, while the materials index fell 5.2% and the financial sector dropped 3.9%.

How did major energy stocks perform during the drop (Woodside, Santos, Origin)?

Woodside fell $1.95, or 5.3%, to $34.55. Santos dropped 82c, or 6.7%, to $11.52. Origin Energy declined 43c, or 3.1%, to $13.66.

What happened to big miners like Rio Tinto, BHP Billiton and Newcrest?

Rio Tinto lost $4.58, or 6%, to $72 a share a day after reporting a record $7.3 billion half-year underlying net profit. BHP Billiton finished down $1.94, or 4.8%, at $38.12. Newcrest Mining fell $1.45, or 3.6%, to $39.20.

Were the big four banks affected and how did bank stocks perform?

Yes — the financial sector was hit. The big four banks fell: ANZ lost 71c to $19.10, NAB dropped 90c to $21.77, Westpac slid 50c to $19.27 and CBA fell $1.29 to $46.26. Macquarie Group also fell $1.80, or 7.2%, to $23.25.

What happened to gold during the market turmoil and is it shown as a safe haven?

Gold — often viewed as a safe haven — closed down US$5.69 from Thursday’s close at US$1,657.61 an ounce, but it was still well up from an overnight low of US$1,640.40, according to the article.