US standoff takes another slice off stocks
THE sharemarket plunged further into the red yesterday as the US sovereign-debt crisis continued.
THE sharemarket plunged further into the red yesterday as the US sovereign-debt crisis continued.The so-far fruitless negotiations have sparked fears among investors that ratings agencies may cut the US credit rating even if Congress and the White House reach agreement on the country's debt ceiling by Tuesday's deadline.Overnight on Wall Street, the Dow Jones dropped1.6 per cent and the broader S&P 500 Index lost 2 per cent. The more volatile Nasdaq market fell 2.7 per cent.Australian stocks followed suit. The S&P/ASX 200 Index finished down 73.6 points, or 1.6 per cent, at 4463.8.Arab Bank of Australia treasury dealer David Scutt said the US woes were beginning to cause panic among investors. Concerns about a downgrade in the US credit rating would have far-reaching consequences."Whilst it looks like policymakers will eventually put a deal on the table that will get approved, it really comes down to ratings agencies as to whether that will be enough to keep the AAA credit rating status," he said."That's what the markets are a little bit more concerned about."The Australian market's sector indices all lost ground, with materials the worst performer, down 1.9 per cent.Mr Scutt said concerns about poor bank earnings in Europe also weighed on the market. The financial sector shed 1.5 per cent.CMC Markets chief analyst Ric Spooner said the release of unexpectedly high inflation figures on Wednesday continued to plague Australian stocks. The Reserve Bank was widely expected to raise interest rates "as soon as the economy starts to pick up enough to justify it", which would be another negative for the banks, reducing demand for credit.The RBA board will meet on Tuesday to discuss its position on interest rates.Index heavyweight BHP Billiton was the day's biggest loser, shedding 97? to $42.03. Rio Tinto fell $1.39 to $81.20.The big four banks also slid, Westpac losing 37? to $20.65, ANZ 29? to $20.99, NAB 27? to $24.18 and Commonwealth 38? to $49.44.Wesfarmers fell 72?, or2.4 per cent, to $29.37 despite annual sales results showing a 6.7 per cent lift at its Coles supermarket chain. Myer dropped 10?, or 4.1 per cent, to a record low of $2.33.Macquarie Group dived $1.34, or 4.6 per cent, to $27.99.A dip in gold sent goldminer Newcrest down 33?, or 0.8 per cent, to $40.17. At the close of Australian trade, spot gold was down $US9.76 at $US1614.69 an ounce.