Shares sink to five-year lows, US car bailout plan, banks want deposit guarantee changes: Economy roundup

Are we there yet? After the Australian sharemarket hit its lowest point since December 2003, the chorus of investors wondering when the market will bottom-out is growing louder by the day.

Are we there yet? After the Australian sharemarket hit its lowest point since December 2003, the chorus of investors wondering when the market will bottom-out is growing louder by the day.

Unfortunately, the answer seems to be that we’re still in freefall.

Wall Street shows no signs of rebounding. Last night the US market hit its lowest point in 11-and-a-half-years, with the Dow Jones Industrial average sliding another 5.56% while the S&P500 shrunk 6.71% to 752.44 – the lowest point since 1997.

It was another night of terrible economic data, with the number of American workers on the unemployment rolls surging to the highest level in 25 years. A manufacturing sector index also slumped, fuelling fears of a deep, long and ugly economic slowdown.

Investors are also nervously watching the progress of political talks to help rescue the US automotive industry. Last night, four US senators announced a bipartisan deal for automakers, but there will be huge strings attached – the politicians will only give assistance if the Government can sign off on a plan to help the car companies return to profitability.

The US market has now fallen 52% since it hit its peak in October 2007; the Australian market is down by around 50%.

Australian investors started selling from the moment the local market opened and the ASX/S&P200 dived 3% in the first half-hour of trade. The benchmark index has since steadied and by 11:35 AEDT had fallen 3.2% or 108.5 points to 3244 points.

Selling was widespread but once again it was banking, resources and media stocks hit hardest. ANZ bank shares lost 4.1% in early trade, while Westpac shed 3.5% and NAB lost 2.8%.

BHP Billiton dropped 3.6% while rival Rio Tinto – which lost more than 8% yesterday – was hammered again this morning, dropping a further 4.4%.

The biggest AGM of the corporate year got under way this morning, with Telstra’s board and management facing their shareholders. The giant telco says it remains undecided as to whether it will bid for the right to build the national broadband network, and says it wants assurances from the Government that it will not be forced to separate parts of its business if it does so.

Meanwhile, Australia’s big banks are reportedly set to ask the Government for changes to the bank deposit guarantee, claiming that unless it is wound back it will become ingrained in the banking system and virtually impossible to remove.