Local shares plunge on global fears

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Local shares plunge on global fears

Close Australian shares lost the most since January 2009 as worries that the global economy may tip back into a recession put investors to flight.

BHP Billiton, the world’s biggest mining company, slumped 5.2 per cent, while Rio Tinto lost 6 per cent as commodity prices tumbled.

Other big falls included Macquarie Group, down another 7.2 per cent, while David Jones was off 5.7 per cent.

The benchmark S&P/ASX200 index ended down 171.1 points, or 4 per cent, at 4,105.4 while the broader All Ordinaries index lost 183.2 points, or 4.2 per cent, at 4,169.7. Both indexes are at two-year lows.

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The overall market lost about $55 billion in value for the day, and about $100 billion for the week. The weekly loss of 7.2 per cent for the ASX200 was its worst return since November 2008 at the depths of the global financial crisis.

Among the major sub-indexes, energy stocks were down 5.6 per cent today alone, with materials off 5.2 per cent and financials down 3.4 per cent.

European markets have opened lower, with London's main index down 2.3 per cent and Germany's DAX off 2.5 per cent.

Growth forecast cut

The RBA today cut its growth forecast for 2011 to 2 per cent, down from its May 6 estimate of 3.25 per cent. In 2012, gross domestic product will accelerate 4.5 per cent, stronger than the prior estimate for a 4.25 per cent expansion.

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The central bank's comments added to investor expectations that the RBA may cut its key cash rate when its board next meets on September 6. The market was rating the prospect of a rate cut of 50 basis points to 4.25 per cent as a three-in-four chance. In one year's time, the RBA may cut its cash rate to 3.5 per cent - equivalent to 5 quarter-point cuts, according to Credit Suisse data.

Only two of the top 200 ASX-listed companies posted gains, education provider Navitas and taxi fare service Cabcharge, with all of the top 100 shares ending lower on the day.

IG Markets strategist Cameron Peacock described the drop as a ‘‘bloodbath’’ that was the result of the anxiety about the European debt crisis spreading to Italy and Spain then colliding with America’s debt problems.

‘‘It all came to a bit of a head, that’s why we’re seeing this global rout at the moment’’ he told AAP.‘‘Everyone thought after the (US) debt ceiling issue was resolved that markets would move higher.

‘‘All it really did was focus the markets on some of the structural problems in the US economy.’’

Mr Peacock said the release of new employment numbers in the US overnight on Friday could calm investors if they were positive.

‘‘No one knows what’s going to happen, anyone that pretends they do is kidding themselves,’’ he said.‘‘You get these panic days, people just liquidate portfolios indiscriminately and that’s why we’re seeing such broad-based losses.

‘‘A lot of companies out there are in stellar financial condition and are doing very well, but the baby gets thrown out with the bathwater as they say.’’

Miners sink

Mining giant Rio Tinto lost $4.58, or 5.98 per cent to $72, just a day after posting a record $7.3 billion half-year underlying net profit.

The world’s biggest miner, BHP Billiton, closed down $1.94, or 4.84 per cent, at $38.12.

Fortescue Metals gave up 39 cents, or 6.36 per cent, to $5.74.

Gold miner Newcrest was down $1.45, or 3.57 per cent, at $39.20.

Among energy stocks, Woodside Petroleum plummeted $1.95, or 5.34 per cent, to $34.55. Santos fell 82 cents, or 6.65 per cent, to $11.52 and Origin Energy dropped 43 cents, or 3.05 per cent, to $13.66.

Banks and financials were down, too. ANZ lost 71 cents, or 3.58 per cent, to $19.10, National Australia Bank fell 90 cents to $21.77 and Westpac was down 50 cents at $19.27.

Commonwealth Bank lost $1.29, or 2.71 per cent, to $46.26.

Telstra was down seven cents at $2.89.

Preliminary national turnover was 4.48 billion shares, worth $9.96 billion, with 63 shares up, 1,413 down and 171 steady.

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On the ASX 24, derivatives traders sent the September share price index futures contract down 190 points at 4,052, with 82,572 contracts traded.

    AAP with Chris Zappone, BusinessDay, Bloomberg

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