The Australian sharemarket dipped below the 4,000 point mark and Wall Street slumped by 6% amid fears of an economic downturn, with some of Australia’s richest entrepreneurs seeing their wealth shrink.
The morning trade saw a steep decline in the value of shares on the ASX, with $27 billion lost in the opening minutes, adding to the $100 billion wiped out last week.
Shares subsequently rallied, but at the close it was down 2.9% to 3986.10. Heavy falls of 3.5% in Shanghai and Hong Kong helped drag the Australian market down.
The major banks were all down, as were retailers such as Myer, Harvey Norman, David Jones and JB Hi-Fi.
Leading Australian entrepreneurs were badly hit, with mining magnate Andrew Forrest seeing $887 million wiped from the value of his Fortescue Metals Group. Westfield founder Frank Lowy saw his company’s value drop by $92 million, Rupert Murdoch’s News Corporation lost $430 million and retail kingpin Gerry Harvey was $112 million worse off.
The fall, the first ASX dip below 4,000 points in two years, follows continued concern over the global economy, with markets jittery over the unprecedented credit downgrade of the US and the deepening debt crisis in Europe.
The US market fared even worse overnight, with the Dow Jones Industrial Average down 5.5%, Wall Street’s sixth largest ever daily decline. The fall also put downward pressure on the Australian dollar, which edged down to 101 US cents.
Widespread predictions of a second global financial collapse have spooked small businesses, but one of Australia’s major banks has urged SMEs to remain calm.
ANZ general manager of small business Nick Reade told SmartCompany that there were areas of strength among small firms, with business sales up 6.6% year-on-year in June.
“From a small business perspective, they need to be conscious of what’s going on,” Reade said. “But volatility will always be there.”
Reade advised small businesses to focus on their cashflow, debtors and accounts receivable, and talk to their lenders if necessary.
Meanwhile, a new Westpac report suggests that growth in Australian job ads has stalled, with the total number of ads placed by employers falling by 0.7% in July. Annual growth in ads has slowed to 1.3%.
“If this trend continues it will soon be painting a quite negative picture of labour market,” says the report.
