Global Financial Crisis
August 6, 2011 by staff
The fall raised the bar could be the Reserve Bank forced to cut interest rates to prevent Australia sliding into recession.
World markets last night continued to tumble, with London falling almost 3 percent in the opening.
Previously, the Fed revised down its forecast for economic growth this year by 1 percentage point to 3.25 percent, blaming weaker household spending and slower recovery than expected in coal exports.
Within minutes of opening, shares of Australia fell more than 4 percent. Oil reserves and resources led to the fall – the highest since February 2009.
The sale followed the black day on Wall Street since the height of the global financial crisis. Asia markets – which remain the key to global growth – were also hit with Japan’s Nikkei closing up 3.7 percent and Hong Kong up 4.29 percent.
”This is a clear example of driving a panic flight to safety,”said Peter Quinton, research director at Bell Potter Securities.
The reputation of the Australian dollar as a refuge was beaten, falling to a minimum of four months and US1.04. US2.2 ¢ over cut the dollar during the local session.
Crude oil fell nearly 5.8 percent, while a series of industrial metals prices also fell around the world.
Australian stocks are deeply technical una”correcci?n”, having lost more than 17 percent since peaking in mid-April this year.
These losses are likely to be eliminated last year a 8.9 percent average increase in the retirement fund balance, where the majority of Australians have their super invested.
Traders yesterday tip Reserve to cut interest rates by 1.25 percentage points in April next year. Such a move would see the official rates fall 3.5 percent.
Current market price,”the Reserve Bank factoring market reflects, at least some chance of GFC Mark II,”said Phil O’Donaghoe, economist at Deutsche Bank.
Treasurer Wayne Swan attempted to calm local investors, highlighting the differences between the economies of Australia and the stuttering of Europe and the USA.
”The Australians should never forget that our economic credentials are the strongest in the developed world and that Australia has a proven track record of managing global economic uncertainty,”said Mr. Swan.
The Treasurer gave no era””inmune the Australian economy to global developments.
Although silent on interest rates, the Fed warned that an outbreak of disorderly sovereign debt crises involving the U.S. and Europe could have an effect perturbador””en the world economy, further weakening the recovery of Australia.
Australia ASX200 index recovered from session lows, but ended yesterday by 171 points in 4105. This followed the Dow Jones industrial average finished Thursday’s session up 4.3 percent, and heavy losses across Europe.
German Chancellor Angela Merkel and French President Nicolas Sarkozy were to interrupt his vacation last night for a conference call about the debt crisis in the euro zone.
World Heritage terminate was caused by a failed effort by the European Central Bank to end bank debt markets.The nervous intervened with a show of support for the purchase of bonds of some small countries, but Italy and Spain, whose mounting problems have come in the spotlight.
This was soon as a signal that the European authorities do not have the financial capacity to absorb large debt problems of the two countries.
A wave of selling spread across the Atlantic as investors feared the U.S. is headed for a double dip recession. However,anlysts said credit markets are still healthy and the U.S. was stronger than a few years ago, so a repeat of the financial crisis was unlikely.
Reena Aggarwal, a finance professor at Georgetown University, said: “There is a big difference during the financial crisis broke in the banking sector now is a crisis of confidence on the basis of the weakest economies, but the banking sector is broken “… ”
A series of weak economic data is released in the U.S. in recent days. Employment figures, published on Saturday morning Melbourne time, will provide a key direction for the health of the U.S. economy. Washington’s reaction to the fall of the market was weak. Markets,”up and down,”said White House spokesman Jay Carney.
Meanwhile, opposition treasury spokesman Joe Hockey infuriated the government when he referred to Greece’s debt-ridden after being questioned about the claim that the level of Australia, era”importante debt.” But said Australia could pay its debt, Mr Hockey said the country’s dependence on foreign funds was a key vulnerability.
Australia is an importer”bulk of money, and as the financial crisis hit last time our banks, the capacity for similar events to hit us again,”said Mr. Hockey.
Mr Swan accused of recklessly hockey trying to speak ill of the economy. ‘To compare the finances of Australia to Greece not only defies logic, but it is extremely irresponsible for someone who claims to high office,”said Mr. Swan.
Government debt in Australia is 7.2 percent of GDP – a tenth of the comparable level of other OECD countries.
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