Australian markets are headed for a 10th straight day of substantial losses today after yet another US banking giant announced multi-billion dollar write-downs overnight.
At midday the S&P/ASX200 is trading at 5672, 2.1% down on yesterday’s close. The US benchmark Dow Jones Index closed down 2.46% to 12159.21 overnight.
The announcement of record $US9.83 billion fourth quarter losses by investment bank Merrill Lynch triggered the initial market tumble in the US – $US16.7 billion in write downs of the bank’s sub-prime affected assets were behind the losses.
US west-coast bank Wells Fargo also announced a 38% decline fourth quarter profits to $US1.36 billion, while investment bank Lehmann Brothers announced plans to cut 1300 jobs to offset losses sustained in the sub-prime crisis.
But while the markets feel the pain, political and economic leaders here and overseas have been taking steps to bolster confidence.
In the US, Federal Reserve chairman Ben Bernanke said that while the growth outlook for 2008 has “worsened” and the downside risks become “more pronounced,” the Fed was not forecasting a US recession in 2008.
Bernanke also reiterated previous commitments to take quick action to cut interest rates if further stimulus was required and gave tacit support to as yet tentative proposals for a publicly funded stimulus package.
And in Australia, Treasurer Wayne Swan has emphasised Australia’s ability to ride out any economic tough times that a US recession might generation.
“There is a lot of turbulence out there and we are not immune form it,” Swan told The Australian Financial Review. “But we are better placed to handle it than we probably have been at other stages in history when these episodes have occurred.”