Stocks Fall as ‘r’ Word Becomes a Reality
Stocks fall as 'R' word becomes a reality
THE local bourse opened more than 3% lower this morning after Wall Street nosedived overnight after it was confirmed that the US economy was in a recession.
The news coming out of the United States was grim with the Dow Jones Industrial Average plunging 680.67 points (7.7%) to 8148.37, its biggest percentage loss since October 15, after the US National Bureau of Economic Research announced that the US economy officially went into recession last December.
Closer to home, the S&P-ASX 200 index traded as low as 3.9% at 3536.4 points at 10.52am EDT while the All Ordinaries index dipped to 3480.5 points on a lack of selling prior to an anticipated aggressive Reserve Bank rate cut this afternoon.
Analysts are predicting a 75 basis point cut to the official cash rate, however ABN AMRO director Dave Iron told Dow Jones Newswires there was speculation that the RBA could slash as much as 125bps.
"That's the only thing I think we can hang our hat on because there weren't enough good pointers from overseas," he told the newswire.
Resource stocks were down in morning trade on the back of weaker base metal prices on the London Metal Exchange overnight.
Three-month copper was down 0.83% to $US3590/t, zinc dropped 3.6% to $1166/t while nickel fell 3.9% to $9800/t.
At 12:29pm EDT, BHP Billiton was trading 6% lower at $A28.09 after hitting an intraday low of $27.44, while its arch rival Rio Tinto plunged to a low of $39.50 before clawing back to $40.06, down 6.2%.
Fortescue Metals Group was one of a handful of miners in positive territory, trading 30c (12%) higher at $2.80, after the company soared as much as 42% yesterday on rumours that BHP might make a bid or Chinese(cnmining) firms may take a slice of the iron ore miner.