Market dips to new ‘08 low

Escalating fears about the depth of the US economic slowdown sent Australian sharemarkets to record low levels for 2008 this morning.

At just after 10am today the S&P/ASX200 dropped 1.9% to 5164.6, below the previous 2008 low of 5186.8 reached on January 22.

By midday the market had recovered much of that lost ground, but was still 82.7 points lower to 5181.3, down 1.57% down on Friday’s close.

Once again it was grim news from the US that sent Australian markets lower. US Labor Department figures released on Friday showed 63,000 jobs were lost in February, the biggest drop in five years. Markets had expected job numbers to rise by 23,000.

That sent the benchmark Dow Jones Average down 1.2% on Friday to 11,893.69, the first time it has fallen below the 12,000 point mark since 3 November 2006.

Meanwhile on the other side of the world the Chinese Government is wrestling with an opposite, but also rapidly worsening problem – surging inflation.

Bank of China figures reportedly show inflation in China hit 8.23% in February, an 11-year high, while a Bloomberg survey of economists has consumer prices up 2.9%.

That means an interest rate rise – and much slower growth – in China is looking increasingly likely, just as the US exerts its own negative effect on the global economy.

All that places the Australian economy in what is increasingly looking like a rather precarious position.

That view was stated in a very stark fashion last week by Morgan Stanley chief market strategist Gerard Minack. According to The Australian, Minack says by this time next year Australia will be in recession, with massive falls in both house and share prices triggering a reversal of our current growth.

This is yet to be the prevailing view among economists, but negative sentiment is clearly spreading.

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