Australian stocks hammered in global sell-off

Business Materials 7 October 2008 04:32 (UTC +04:00)

Sellers swamped the Australian stock market at the opening bell Tuesday as investors took their turn to join in the global sell-off, dpa reported.

The ASX 200 lost 142 points, or 3.1 per cent, to take the index to 4,398.

It was the same story in New Zealand, where the index gave up 79 points, or 2.6 per cent, to 2,969 at the opening.

The drop in share values was mirrored in the Australian dollar's performance on the cross rates. It gave up 5 US cents in overnight trading to reach a two-year low of 72 US cents.

The Australian dollar has depreciated 20 per cent since June as fears grow that a worldwide recession will cut demand for coal, iron ore and other big export earners.

"Commodities demand numbers of the US have been shocking recently and there are signs of slowing in China, so people are reassessing that," said National Australia Bank economist Jeff Oughton. "Both of those work against the Aussie dollar."

Most analysts are tipping a rate cut of at least 0.25 per cent when the Reserve Bank of Australia meets Tuesday afternoon. Some are factoring in a 50-basis-points cut that would take the cash rate to 6.5 per cent.

A rate cut will exert further downward pressure on the local currency because the yield from holding it will be crimped. Banks struggling with the credit crisis are not expected to pass all of the rate cut on to borrowers.