Local share market facing a hit over global turmoil

THERE’S havoc on the Australian share market today, with companies suffering one of their worst days in five years.

NEW YORK, NY - AUGUST 21: Traders work on the floor of the New York Stock Exchange (NYSE) on August 21, 2015 in New York City. The Dow fell over 500 points in trading today as global markets continue to react to economic events in China. Spencer Platt/Getty Images/AFP == FOR NEWSPAPERS, INTERNET, TELCOS & TELEVISION USE ONLY ==

UPDATE

OVER $70 billion has been wiped from the Australian share market in its heaviest fall in almost four years, as concerns about China’s economy shake global investors.

Already down more than two per cent after a torrid morning of trade, the benchmark S&P/ASX 200 and the All Ordinaries indices hit two year lows after China’s share markets plunged more than seven per cent in early trade.

The local indices were down 3.5 per cent at 1245 AEST, their largest single day fall since September 2011.

Losses are being felt across all market sectors, with the banking, mining and energy giants among the worst affected.

Renewed fears about China’s slowing economy are the main factor, after manufacturing activity in the world’s second largest economy slumped to six-and-a-half-year lows in August.

Volatility on Chinese share markets, recent moves by China to devalue its currency, plunging oil prices and uncertainty about when US interest rates will be lifted are also combining to spark the global share sell-off.

Wall Street plunged in its most recent session, with the Dow Jones Industrial Average losing more than 500 points and the S&P 500 fell below 2,000 points for the first time since January 30. But CommSec chief economist Craig James said worries about China’s economy are overrated, with authorities there dealing with the “growing pains” of a maturing economy.

Rather than the beginning of a crisis, the market falls are a correction from highs reached earlier in 2015, he said.

“At present we would view the global sharemarket correction as a correction we had to have — a situation that will be beneficial in injecting more value into markets,” Mr James said.

“There are clearly risks, but the data indicates that US and European economies continue to recover; lower oil prices will serve to boost consumer and business spending; and Chinese authorities are trying a range a measures to maintain momentum in their economy.” The big four banks were all more than 3.5 per cent weaker in early afternoon trade, energy producers were more than four per cent lower, and Telstra had dropped 2.8 per cent.

— AAP

EARLIER

INVESTORS are bracing themselves for a painful start to the week, with Australia’s share market tipped to plunge 2 per cent today on the back of global turmoil.

Markets in the US and ­Europe ended the week in a sea of red as fears about a ­Chinese slowdown sent shareholders scrambling for the exits.

The local bourse is tipped to take a solid hit when it opens this morning, in the wake of major sell-offs overseas.

US share prices plunged more than 3 per cent on Friday while London’s benchmark FTSE sank 2.83 per cent.

AMP chief economist Shane Oliver and CommSec chief economist Craig James are both tipping a drop of about 2 per cent when the Australian market opens for trading today.

“It will go down, the question is by how much,” Dr Oliver said.

“We will take our lead from what happens in Asia, because that’s the centre of what’s happening.”

More than $4.5 trillion was wiped off the value of global equities last week after China announced a shock decision to devalue its currency.

Fears about slower economic growth were exacerbated by a plunge in oil prices and suggestions the US Federal Reserve was considering increasing interest rates for the first time since 2006.

But Dr Oliver said he thought the reaction on the local bourse would be one of short-term pain, rather than the start of a downward trend.

“Our market has already had a string of falls over the last few months,” he said.

“The weakness we are seeing in the emerging world has been factored into our market more than it has in the US.”

Dr Oliver said despite the current significant setback, share markets were likely to remain in a broad rising trend.

“Given this, I am reluctant to ditch my year-end target of 6000 for the ASX 200,” he said.

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