About $40 billion was wiped off the value of the Australian sharemarket this morning after a dramatic night on overseas markets raised new fears of a recession in the US and Europe.
Local stocks were down around 2.97% in morning trade, with retail and media stocks leading the falls.
Shares in Billabong International fell a staggering 25% at the open after the company delivered a poor profit result for 2010-11 and declined to confirm earlier guidance that earnings would increase 10% in the 2011-12 year.
Fairfax Media led the media sector lower, with its shares falling 7.4% to 75c amidst concerns that the company may have to follow competitor APN News & Media and write-down the value of its newspapers in New Zealand.
But the general market sell-off spread from overseas, after an ugly night on Wall Street. The benchmark S&P 500 Index fell 4.5%, while the Dow Jones Industrial Average dropped 3.7% and the Nasdaq was down 5.2%.
But it wasn’t just American markets that suffered.
London’s FTSE 100 index dropped 4.5%, while Frankfurt’s DAX index plunged more than 5.8%.
The reason was an avalanche of bad news including:
The stream of bad news also caused traders to shift out of “risk” currencies like the Australian dollar, which fell, to US103.89c cents from US104.83c.
Shares in insurer QBE fell 9.4% after the company said its insurance margin was likely to fall over the full 2011 calendar year.
For the six months to June 30, QBE posted net profit of $673 million, up 53% on the previous corresponding period but lower than initial analyst estimates.
Like most insurers, QBE has been battered by a mix of natural disasters in Australia, New Zealand, Japan and the United States.
Westpac has moved to try and stimulate credit growth by dropping the rate on its three-year fixed Premier Advantage Package home loan 0.2% to 6.59%.
The rate cut applies to new home loans of at least $150,000, Westpac said in a statement.
The cuts follow similar cuts to fixed-rate mortgages by ANZ and the Commonwealth Bank in the last week.
Westpac has also recently cut the value of its fixed-rate loan for existing customers from 6.99% to 6.79%.
The founder and former chief executive of ABC Leaning, Eddy Groves, will face court next May to face charges of breaching the Corporations Act.
Groves was committed to stand trial in February, but the date for the trial had not been set until this morning.
The Australian Securities and Investment Commission has alleged that Groves and fellow ABC director Martin Kemp failed to discharge their duties as directors and acted dishonestly in a deal which saw ABC buy three childcare centres from Kemp in early 2008.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
