Shares drop another 4%, oil still sliding, consumers fear job losses: Economy roundup

The bears are firmly back in control of the Australian sharemarket, as fears of a global recession continue to weigh heavily on markets from Wall Street to Sydney.

The bears are firmly back in control of the Australian sharemarket, as fears of a global recession continue to weigh heavily on markets from Wall Street to Sydney.

Australian shares have taken a flogging this morning, dropping sharply after the market opened following heavy losses on Wall Street overnight.

The Dow Jones Industrial Average fell 4.73% to 8282.66, while in Europe the FTSEurofirst 300 index fell 3.36% to 853.88.

Last night’s sell-off was sparked in part by US Treasury Secretary Henry Paulson’s announcement that the US Government’s $US700 billion bailout won’t cover bad mortgages. This contributed to growing uncertainty regarding the Government’s approach to banking, sparking selling of financial stocks.

Back in Australia, the benchmark S&P/ASX200 index was down 178.5 points or 4.55% to 3748.8 at 12.10pm AEDT.

The familiar theme of the past few months was repeated, with miners and financial stocks sold off again.

The big losers for the morning were BHP, which dropped 8.12% to $26, and Rio Tinto fell 6.31% to $70.45. Fortescue Metals Group also lost 8.82% to $1.85.

Commonwealth Bank fell 4.9% to a three-and-a-half-year low at $33.38, while Westpac lost 5.2% to $18.10.

Meanwhile the dollar also took a hit, dropping to $US63 cents, despite the Reserve Bank of Australia confirming it had intervened in the foreign exchange market to support the struggling local currency.

Oil has continued its slide, dropping over 5% to close at $US56 a barrel.

Meanwhile, Westpac has released its inflation and unemployment expectations for November. Senior economist Anthony Thompson says inflation is fast becoming a non-issue, with the percentage of consumers expecting inflation above the 2% to 3% target dropping from 65.6% to 51.8% – the lowest since 2005.

But Thompson also says the unemployment expectations index jumped 13.2%, which may indicate a major employment slowdown for the first half of 2009.

But Thompson expects part-time jobs to hold up reasonably well. “We expect deteriorating full-time employment ahead to be partially offset by resilience in part-time employment, as firms cut back on labour inputs by reducing hours worked,” he says.