Double dip fears cost market $60b

Q: How did market strategists describe the sell-off and the underlying sentiment?

IG Markets strategist Cameron Peacock called the drop a bloodbath, saying anxiety about the European debt crisis spreading to Italy and Spain colliding with US debt worries brought the global rout to a head.

THE sharemarket slumped 4 per cent to its biggest one-day loss since the height of the global financial crisis almost three years ago.

By InvestSMART · 6 Aug 2011

By InvestSMART ·
6 Aug 2011

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THE sharemarket slumped 4 per cent to its biggest one-day loss since the height of the global financial crisis almost three years ago.

Fresh concerns that the US could be heading back into recession and fears that Europe's debt woes could be spreading to Italy and Spain sent investors to the exits. The fall wiped almost $60 billion from the value of Australian stocks yesterday and took the cumulative loss to about $100 billion for the past week.

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

Australian stocks closed at their lowest level since July 2009. It was the biggest one-day percentage fall since November 20, 2008.

The benchmark S&P/ASX200 index slumped 171.1 points, or 4.0 per cent, to 4105.4, while the broader All Ordinaries index was 183.2 points, or 4.21 per cent, weaker at 4169.7.

Every sector was down and the resources boom was forgotten, with the mining and energy sectors off by more than 5 per cent.

IG Markets strategist Cameron Peacock described the drop as a "bloodbath" caused by anxiety about the European debt crisis spreading to Italy and Spain then colliding with the US's debt woes. "It all came to a bit of a head, that's why we're seeing this global rout at the moment" Mr Peacock said.

Mining giant Rio Tinto lost $4.58, or 5.98 per cent, to hit $72, just a day after posting a record $7.3 billion half-year underlying net profit. BHP Billiton closed down $1.94, or 4.84 per cent, at $38.12. Gold miner Newcrest was down $1.45, or 3.57 per cent, at $39.20.

Among energy stocks, Woodside Petroleum plummeted $1.95, or 5.34 per cent, to $34.55. Santos fell 82?, or 6.65 per cent, to $11.52 and Origin Energy dropped 43?, or 3.05 per cent, to $13.66.

ALL ORDS

AUSTRALIA

AUG 4

4169.7

183.20(-4.2%)

HIGH 4352.9

LOW 4150.7

SOURCE: BLOOMBERG

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Frequently Asked Questions about this Article…

What caused the Australian sharemarket’s biggest one-day fall since the global financial crisis?

The one-day 4% slump was driven by fresh worries that the US could be slipping back into recession and fears Europe’s debt problems might spread to Italy and Spain. The combination of those concerns, plus a heavy overnight fall in US markets, sent investors selling and triggered the large market drop.

How much market value was wiped out in the sell-off and what were the week-to-date losses?

The single-day fall wiped almost $60 billion from the value of Australian stocks, and the cumulative loss for the week reached about $100 billion, according to the article.

How badly did the major Australian indices fall during the rout?

The benchmark S&P/ASX200 slumped 171.1 points, or 4.0%, to 4105.4. The broader All Ordinaries index fell 183.2 points, or 4.21%, to 4169.7. Australian stocks closed at their lowest level since July 2009.

Which sectors were worst hit in the market rout?

Every sector fell, with the mining and energy sectors particularly hard hit — both were down by more than 5% during the sell-off.

How did major mining companies like Rio Tinto, BHP and Newcrest perform?

Mining giant Rio Tinto lost $4.58 (5.98%) to $72 just a day after reporting a record $7.3 billion half-year underlying net profit. BHP Billiton closed down $1.94 (4.84%) at $38.12, and gold miner Newcrest fell $1.45 (3.57%) to $39.20.

What happened to major energy stocks such as Woodside, Santos and Origin Energy?

Energy stocks fell sharply: Woodside Petroleum plunged $1.95 (5.34%) to $34.55. Santos fell about 6.65% to $11.52, and Origin Energy dropped about 3.05% to $13.66, according to the article.

Did the Australian sell-off follow international market moves?

Yes. Local traders followed an overnight plunge in the US, where the Dow Jones Industrial Average sank 4.3% (512 points) — its worst one-day drop in more than two years — and global worries helped fuel the Australian rout.

How did market strategists describe the sell-off and the underlying sentiment?

IG Markets strategist Cameron Peacock called the drop a "bloodbath," saying anxiety about the European debt crisis spreading to Italy and Spain colliding with US debt worries brought the global rout to a head.