Australia Index Drops 5%

123jump.com Staff
08 Oct, 2008
New York City

Stocks in Australia plummeted sharply on the weaknesses in the global economy as the International Monetary Fund forecasted that the losses on U.S. based loans and securities might rise to $1.4 trillion. The benchmark index in Australia dropped 5%.

[R]3:00AM New York, 7:00PM Sydney - Australian home loan approvals decline 2.2% to 48,342 in August.[/R]

Stocks in Australia plummeted sharply on the weaknesses in the global economy as the International Monetary Fund forecasted that the losses on U.S. based loans and securities might rise to $1.4 trillion.

The Fund also contends that crisis will ultimately spill over from the mature markets to emerging economies as well.

Market Sentiment

In Sydney trading ASX 200 slid 4.99% or 230.6 to 4,388.10.

Of the ASX 200 index stocks 11 rose, 183 dropped, and 6 were unchanged. CFS Retail Hope Property led advancers in the index shares with a rise of 4.35% followed by Cabcharge Australia gaining 4.07%.

Australian Home Loan Approvals Drop 2.2% in August

The Australian Bureau of Statistics reported on its Web site today that the number of loans granted to purchase homes and apartments fell to a seven-year low by 2.2% to 48,903 in August, while the number of owner occupied housing finance dropped 2.3% to 48,342 in trend terms.

Homebuyer commitments as a percentage of total owner occupied housing finance commitments were unchanged at 18.6%.

Australian Sentiment Drops to Two Year Low

The Westpac-Melbourne Institute survey reported that the sentiment index dropped the most in two years, falling 11% to 82 points in October.

Losses on U.S. Based Loans to Soar to $1.4 trillion

The International Monetary Fund reported on its Web site yesterday in the Global Financial Stability Report (GFSR) that there was need for coherent and decisive interventions to stem the current deleveraging from being ""disorderly and costly to the real economy"".

According to GFSR, the losses on the U.S. mortgage securities are expected to increase to $1.4 trillion from an earlier estimate in April of $945 billion.

The report prescribes a three-part approach to stave off disorderly deleveraging through the government purchase of illiquid and impaired assets from lenders, injecting capital into viable institutions that are struggling and rescuing dysfunctional funding markets.

The Fund projects that financial institutions need to raise $675 billion, but however noted that the interbank lending has seized.

The GFSR estimates that credit growth in the United States, the euro area, and the United Kingdom will ease to near zero over the next year before regaining in 2010.

Jaime Caruana, Director of IMF''s Monetary and Capital Markets Department said, ""A comprehensive approach, if consistent among countries, should be sufficient to restore confidence and proper functioning of markets and avert a more protracted downturn in the global economy.""

Australian Dollar Declines

The Australian dollar plunged to 68.33 American cents to one U.S. dollar in today''s trading.

Gainers & Losers

CFS Retail Hope Property led advancers in the ASX 200 index shares with a rise of 4.35%, in Cabcharge Australia of 4.07%, in Babcock & Brown of 2.61%, in Sino Gold Mining of 1.75%, and Gunns Limited of 1.60%.

Gold stocks advanced as the price of the yellow metal soared to $880.50 a troy ounce.

Nexus Energy led decliners in the ASX 200 index shares with a drop of 29.82% followed by losses in Babcock & Brown of 19.54%, in Linc Energy of 18.78%, in Panaust Ltd. of 18.18%, in Riversdale Mining of 17.70%.

Commodity stocks declined on slowing demand for raw materials and the crisis in the global markets persist.

Paladin Energy slipped 17.68%, Felix Resources dropped 16.77%, Macarthur Coal slumped 14.74% and Fortescue Metals shed 14.42%.