Stocks drop on US recession fears
THE sharemarket has closed in negative territory after US stocks fell overnight amid fears that the world’s biggest economy could be heading for a recession. At the 4.15pm AEST close, the benchmark S&P/ASX200 index finished down 87.2 points to 6191.2 and the All Ordinaries had lost 86.9 points to 6209.6.
On the Sydney Futures Exchange, the September share price index contract was down 71 points to 6220 on a volume of 22,370 contracts.
ABN Amro Morgans private client adviser Bill Bishop said the Australian market had reacted to US sub-prime mortgage fears and the release of US monthly job figures on Friday night, which were weaker than expected.
“The sub-prime fears came up to play on Wall Street and that combined with the drop in US jobs produced a drop on Wall Street which has spooked our market,” he said.
“Our resources copped it as metal prices fell because of the Americans.
“Everyone thinks the American consumer will stop buying from China and then our resources won’t be needed, but I don’t think we have to worry too much … China will buy the metals anyway.”
Mr Bishop said there was a good chance market volatility would continue for several months.
“This sub-prime crisis and how it affects the rest of us is what everyone is worried about, but the Australian economy is in good shape … but that doesn’t mean it can’t get sideswiped by the Americans.
“Half the world is saying the volatility will continue and we don’t know how wild the fluctuations are going to be.”
In the US, the Dow Jones industrial average lost 249.97 points, or 1.87 per cent, to 13,113.38.
The Standard & Poor’s 500 Index lost 25 points to 1,453.55 and the Nasdaq Composite Index slid 48.62 points to 2565.70.
The decline followed US non-farm payrolls data, which showed US employers cut nearly 4000 jobs in August.
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