The local sharemarket has fallen 1.5% this morning after a shocking night on Wall Street, where stocks plummeted 3.5% after the Federal Reserve announced new efforts to get the American economy growing again.
The negative performance highlights the market volatility that has been plaguing the global economy for weeks now, pressured by the threat of a sovereign debt crisis in Europe and the struggling American economy.
The poor result also comes after the local sharemarket dropped through the 4,000 point barrier yesterday.
The benchmark S&P/ASX200 index was down 1.5% or 60 points to 3904.7 at 12.00 AEST, while the Australian dollar continued to fall to a 10-month low of $US0.93c.
Shares in BHP Billiton and Rio Tinto have fallen to year lows, dropping 2.32% and 2.85% respectively.
AMP shares have fallen 2.07% to $3.78, while Commonwealth Bank shares have fallen 0.02% to $42.92. NAB lost 1.35% to $21.23, while Westpac fell 0.95% to $18.74.
In the United States, the Dow Jones Industrial Average plummeted 391 points or 3.51% to 10,733.03.
The poor performance comes as treasurer Wayne Swan has told world leaders that financial reforms must be implemented to stop “falling off the edge again”.
“Some important policy steps have been taken in Europe and the US to deal with their fiscal situations but much more needs to be done,” Swan told the G20 Finance Ministers’ and Central Bank Governors’ dinner in Washington.
“But our challenge is to avoid falling off the edge again. We have to restore credibility, act decisively, restore confidence, and boost growth and job creation.”
“I’m disturbed when I hear comments that sufficient measures have been agreed to stabilise the situation. Markets do not believe this.”
Leaders of the world’s largest economies have written a joint letter urging governments in the Eurozone to avoid a sovereign debt crisis that could cripple the global economy.
“Eurozone governments and institutions must act swiftly to resolve the euro crisis and all European economies must confront the debt overhang to prevent contagion to the wider global economy,” the letter said.
Signatories include Australia, Britain, Canada and South Korea.
The letter comes as World Bank president Robert Zoellick has told AAP that countries facing severe debt must act.
“Europe, Japan, and the United States must act to address their big economic problems before they become bigger problems for the rest of the world,” he said. “Not to do so is irresponsible.”
The Reserve Bank of Australia has said in its half yearly Financial Stability Review that households continue to pay down debt due to fears over the global economic system.
“Given that household net worth declined in the wake of renewed volatility in global financial markets, the prevailing mood of caution appears unlikely to lift in the near-term,” it has said.
The RBA said over the past year, households have saved 10.5% of their income, the highest level since the 1980s.
“Some households are saving more by choosing to pay down their debt more quickly than required,” the bank said. “Net repayments on credit cards have picked up in recent months.”
“These shifts in saving and borrowing behaviour have in part been enabled by a favourable labour market,” the bank said.
The publication of the document comes after an RBA board member gave a speech yesterday in which it was said the Australian economy is beginning to favour services over products.
David Gonski, chairman of ASX Ltd, has reportedly welcomed the launch of rival bourse operator Chi-X at the end of October 31.
“With the challenges of change come opportunities for ASX to expand its range of products and services, develop new solutions for our customers and alternative revenue streams,” Mr Gonski has told shareholders.
ASX chief executive Robert Elstone is set to be replaced by Elmer Funke Kupper on October 6.
Hewlett Packard has sought to placate investors by announcing ex-eBay chief Meg Whitman would step in as chief executive, and the board would be overhauled.
Outgoing chief Leo Apotheker had been in the role for just 11 months.
Chairman Ray Lane has told shareholders the company is having a fresh start after recent scandals over sexual harassment and wire-tapping plagued the company.
Analysts have expressed surprise over the appointment of Whitman, who transferred eBay into a global retail juggernaut but was criticised in her final years at the company. She joined the board just eight months ago.
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