Market bounce defies world
A DRAMATIC turnaround saw the Australian sharemarket pull back from the brink as expectations swept global markets the US Federal Reserve was poised to step in to resuscitate the ailing American economy.
A DRAMATIC turnaround saw the Australian sharemarket pull back from the brink as expectations swept global markets the US Federal Reserve was poised to step in to resuscitate the ailing American economy.After a stomach-churning 5.5 per cent plunge triggered by a panicked session on Wall Street, Australian shares staged a record recovery to close in the black.The 268-point rally in local stocks was simply "extraordinary" said Goldman Sachs institutional dealer Richard Coppleson. "Today was one of those rare days that you will never forget we saw the greatest one-day recovery in the Australian market," he said.The benchmark ASX200 index ended up 48.7 points, or 1.22 per cent, at 4034.8 points one of the few markets in the world to finish in positive territory.Pummelled by days of sustained selling, the Australian dollar briefly fell below parity, slipping to US99? for the first time since March. The dollar later recovered to push back above $US1.Treasurer Wayne Swan said Australia would continue to enjoy economic growth given the positive outlook for China. However with global markets on edge he admitted we were in "unchartered waters"."What we've got to ensure is that countries, particularly G20 countries, work closely together in the days, weeks and months ahead to ensure we can respond to these conditions," Mr Swan said.Wide-ranging debt problems in Europe continue to unsettle investors. The European Central Bank has this week sought to calm investors by providing support for Spain and Italy. The fear is that the financial crisis could worsen in those countries, which would bring the problem closer to France and Germany.While mining companies and bank stocks initially led shares deep into negative territory, the mood turned positive by mid-afternoon, with the US Federal Reserve tipped to announce fresh moves to stimulate its sputtering economy.These could include another round of buying its own government bonds, known as quantitative easing, or using stronger language to signal official interest rates there would remain at record low levels for a longer period of time.Members of the US Federal Reserve's powerful Open Market Committee were scheduled to meet at 4.15am Melbourne time.Amid the volatility, investors clamoured for gold, pushing the price of the precious metal to an all-time high of more than $US1700 per ounce.In Australia, traders are betting the Reserve Bank could push through cuts of 1.25 percentage points in official interest rates to help insulate the economy from a global recession, despite the lingering concerns about inflation.The Commonwealth Bank and Westpac have joined the growing number of lenders cutting interest rates across fixed interest mortgages. CBA was the first of the big four banks to move, yesterday detailing cuts to its fixed rate home loans by up to 60 basis points from next week. The fixed rates for CBA's one to five year products will now range from 6.59 per cent to 6.99 per cent.In its first trading session since Friday's historic downgrade of America's credit rating, Wall Street staged losses reminiscent of the height of the financial crisis.Aided by mounting fears about the stalling US economy, the Dow Jones industrial average fell 634 points (5.6 per cent) on Monday, nearing official bear market territory.In his first words since S&P's decision on Friday, US President Barack Obama sought to calm Wall Street by saying America's problems could be solved, as long as there was the necessary political will. He dismissed the rating downgrading. "This is the United States of America. No matter what some agency says, we will always be a triple-A country," he said.Some of the steepest market decreases were initially seen across Asia even as most countries across the region remain in fundamentally good shape, with growth rates far above those in the West and debt levels well below those in many developed nations. Shares in Tokyo and Hong Kong ended lower.National Australia Bank chief executive Cameron Clyne yesterday insisted the nation's banks were strong enough to survive the panic sweeping global markets."As we stand here today, notwithstanding there are some pockets (in the economy) that have been stressed, the fundamentals are OK," Mr Clyne said.Adding to the early sense of uncertainty on markets, a NAB survey of business conditions slumped to its lowest reading since the slow-down caused by the Queensland's floods.ASX 200 Plunges 5.5% before dramatic recoveryDOLLAR$1.01 down 1.9%GOLDHits record $US1772.38 Figures at 8pm yesterday