Market falls on mounting sub-prime fears: economy round up

Australian markets have been driven lower today on renewed concerns that the volatility seen on financial markets in recent months could just be the beginning of greater trouble to come.

At 12.45 the S&P/ASX 200 is down 1% on yesterday’s close to 6339.3, taking the loss in Australian stock market value experienced in recent months above 6%.

Evidence that the sub-prime crisis is having an ever greater impact on financial markets has come from a number of sources in recent days.

RAMS yesterday announced that it having trouble refinancing almost $6 billion in loans because of risk aversion on financial markets, one of its key bankers, NAB, to reassure markets that it was not preparing for a mass sell off of RAMS debt.

Yesterday the Organisation for Economic Co-operation and Development warned that “it may well be that the recent correction is only a precursor of a more protracted downturn” and points to rocky times ahead for the US.

“Previous assertions by forecasters that the sub-prime crisis would not have substantial effects on the US or even the global economy have by now been mostly withdrawn, and more recent economic news points to a more protracted economic adjustment,” The OECD says.

And the US Federal Open Market Committee has been forced to revise its forecasts for the US economy to predict slower growth, a change from recent more confident statements by Fed officials.

All in all, it appears stormy economic clouds loom on the horizon.