Market tumbles further as commodities sag: Economy roundup

The S&P/ASX200 could fall below the totemic 6000 mark today, down 1.2% on yesterday’s close to 6004.1 by 12.40pm today.

The slump comes despite a strong lead from the US Dow Jones Index, which closed up 0.92% to 12,853.09 overnight.

Australian markets seem to be suffering from the worst of all worlds at the moment – they fall when US markets fall, and just keep falling even when US markets lift.

The reason for the Australian market’s contrary tack is a drop in commodity prices, which in turn triggered selling in big mining stocks. An index measuring of six key metals traded on the London Metal Exchange fell 0.6%, Bloomberg reports, while investment bank UBS announced it has cut its forecasts for aluminum, copper and zinc for 2008.

Shares in Australian property investor Centro Property were placed in a trading halt pending an announcement from the company. Centro Retail Trust, an affiliate of Centro, was also put in a trading halt.

Centro has been struggling to re-finance $1.3 billion in debt maturing in February due to the credit crisis.

The confidence in the US last night resulted from comments by US Federal Reserve Chairman Ben Bernanke suggesting he is prepared to make significant cuts to interest rates there to fight off a recession.

In other circumstances the comments would also have produced a lift in Australia, especially given a new report by Goldman Sachs released yesterday pointing to the significant effect a US recession would have on the Australian economy.

“As reports of $US100 per barrel oil prices, US recession, UK and Japanese difficulties, declining equity prices, rising inflation pressures and the debasement of the Australian cricket team all take effect, Australian consumer confidence will likely fall appreciably in coming months,” Goldman Sachs economist Tim Toohey told The Age.