Shares plunge 5% after Wall Street rout, global growth fears: Economy roundup

Australia’s sharemarket has fallen sharply this morning as the realisation sets in that this crisis will last for many months yet.

Australia’s sharemarket has fallen sharply this morning as the realisation sets in that this crisis will last for many months yet.

The benchmark S&P/ASX200 index fell 5.6% or 240.8 points to 4059.2 at 11:50am AEST.

This followed a shocking night on Wall Street, with the Dow Jones Industrial Average plummeting 7.87% and the tech-focused Nasdaq Composite Index sinking 8.47%.

Despite the US Government’s attempts to throw money at the country’s stricken financial system, investors are starting to believe it may be too little, too late to prevent the economy sliding into a deep recession.

Overnight, the Federal Reserve’s Beige Book report showed economic activity weakened across the United States in September as businesses revised capital investments and consumers curtailed spending.

If that wasn’t enough to spook Australian investors, then came yesterday’s announcement by Rio Tinto that the global recession will hit China and this slowdown will force Rio to look at its capital spending plans and project timelines.

Given demand from China is supposed to be Australia’s big weapon in the battle against recession, it’s not good news when one of our biggest exporters goes a bit cold on the place.

Not surprisingly, big miners have led the local market down this morning, with BHP Billiton crashing 9.7% and Rio Tinto falling a whopping 13.2%. Shares in Andrew Forrest’s Fortescue Metals Group have slumped 11.3% after jumping more than 45% earlier this week.

In other big corporate news this morning, National Australia Bank has decided to bring forward the announcement of its earnings for the 12 months to 31 September to 21 October in a bid to keep the market fully informed of the impact of the chaos on the company. But it’s not all bad news – NAB still expects to post cash earnings of $3.9 billion.

In other news, Telecom New Zealand and its Australian subsidiary AAPT have pulled out of a consortium bidding for the national broadband network, just weeks before the 26 November deadline for final submissions.

There are growing fears that the credit crisis will damage the ability of bidders to fund the rollout of the network.

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