Freefall Friday: $84b - worst day in 21 years

ASX ... market plunges (Get Image)

The Australian share market has plunged in opening trade after a disastrous session overnight on Wall Street.

Shares have slumped more than 5 per cent in the first half hour of trade.

About 10:30am AEST, the All Ordinaries index was down 229 points to 4,062, the lowest level in nearly three and a half years.

The ASX 200 lost 222 points to 4,092.

Earlier today it was tipped the local market would follow the United States down as Wall Street hit a new five-year low.

This morning the Dow Jones Industrial Average finished down 678 points, closing under the 8,600 mark.

The last time it dropped below 9,000 was in August 2003.

The Nasdaq slumped more than 5 per cent and the S&P 500 retreated 7.5 per cent.

Overnight, the Australian futures market plunged with the Share Price Index 200 ending down 4.2 per cent.

The Australian dollar also dipped against the greenback this morning after it rose above 71 US cents overnight.

It is now buying about 68.2 US cents.

Updated: 5:00 (AEST)

Freefall Friday: -$84b - Worst day in 21 years

Australian shares had their worst day since the crash of 1987, losing more than 8%, as mounting recession fears sent equity markets tumbling around the world.

The benchmark S&P/ASX-200 stock index recorded its biggest one-day loss in its 16-year history, dragging the value of the main share index below $1 trillion. The broader All Ordinaries recorded its worst day since the October 1987 crash.

- ASX-200 loses 8.3%
- Stocks plummet 16% for the week, worst since 1987
- Value of ASX200 falls below $1 trillion
- More than $680 billion wiped out in past year

The S&P/ASX200 ended down 8.3%, or 360.2 points, to 3960.7. The All Ordinaries lost 8.2%, or 351.9 points, to 3939.4.

The indices, both of which ended on their lows for the day, are at their weakest since May 2005.

The ASX200 lost almost 16% for the week, about three times the amount it lost in the week after the September 11 attacks in 2001.

In a day of dramatic plunges, the index lost more than $80 billion off its value, sinking below the $1 trillion mark. It has fallen more than $650 billion from its peak on November 1, 2007.

Across the board plunge

All sectors in the index fell more than 5%, with the energy sub-index plunging the most, losing almost 12%, as the oil price plummeted.

Financial companies lost 8.6%.

BHP Billiton shaved the most off the index, falling $2.10, or 7%, to $27.74. Rio Tinto fell $5.01, or 6.4%, to $73.00. Fortescue Metals Group dived 62 cents, or 19%, to $2.68. Concerns that China's slowing economy will cut its demands for commodities, including iron ore, have battered mining companies in recent days.

Only one company rose - Babcock & Brown Capital, which gained 2 cents, or 0.9%, to $2.35.

NAB fell $2.93, or 12%, to $20.80. The Commonwealth Bank shed $2.85, or 6.7%, to $39.55, ANZ lost $1.35, or 8.1%, to $15.30, Westpac fell $1.31, or 6.1%, to $20.19. Macquarie Group lost $2.98, or 9.5%, to $28.52.

Today's drop in the sharemarket seems to be led by the Nikkei, which was down as much as 11% at one point, said 4Cast Ltd's Michael Turner.

"Everyone has followed the Nikkei down," he said. "Everyone is fearful at the moment."

"And they get their money out of equities first thing."

"There's a bit of a crash happening," he said. "A lot of people's faith is being shaken."

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Market plunges 5pc, dollar crashes

Australian shares closed down 5 per cent amidst global economic panic.

The Australian share market plunged 5 per cent today, as the dollar hit a new five-year low.

Fear of a global recession has seized markets, with big falls across the major indices overnight.

The Dow Jones Industrial Average plunged 5 per cent and today the local All Ordinaries index fell by the same margin. It was down 228.1 points at 4369.8.

After hitting a fresh three-year low, the ASX 200 closed 231 points lower at 4,388.

CommSec's Savanth Sebastian says there are growing concerns about the ability of emerging economies to withstand the financial crisis.

The fact that we saw the Indonesian market fall over 10 per cent and actually close trading for the day really had a significant impact on the rest of Asia," he said.

The miners have been hard hit, with Fortescue Metals Group down more than 14-per-cent.

The local currency, meanwhile, has dived more than three US cents in less than an hour to a five-year low.

About 4:45pm AEDT it was buying 67.65 US cents.

Asian markets suffer

Stocks around Asia have also suffered sharp falls.

Japanese share prices plunged 9.38 per cent, the biggest loss since the 1987 "Black Monday" crash, as panic-selling erupted over the global financial crisis.

Markets in Hong Kong, Singapore and South Korea were all down by about 5 per cent.

In Indonesia, a 10 per cent fall in share prices prompted officials to suspend market trading.

The main index in South-East Asia's largest economy nose-dived in response to sharp falls on Wall Street overnight before trading was suspended for an "indefinite period".

Indonesia's stock market was never suspended during 1997's Asian financial crisis.

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$50b Aussie wipe-out

A board at the New York Stock Exchange displays the final numbers.

Australian stocks wiped more than $50 billion off the value of the market today after the US House of Representatives rejected a $US700 billion ($860 billion) plan to rescue the financial system.

The S&P/ASX 200 Index fell as much as 258.3 points, or 5.4 per cent to 4643. Futures had indicated a fall as much as 7 per cent.

Shares in Macquarie Group fell as much as $5.60, or 15 per cent, to $31.60.

Babcock & Brown shares were the biggest single fall in early trade, losing as much as 35 per cent, or 82.5 cents, to $1.52.5.

Trillion-dollar US wipe-out

The US House of Representatives voted down the package overnight, sending Wall Street into a panic and driving the Dow Jones Industrial Average down a record 777.68 points - or 6.98 per cent - wiping approximately $US1.2 trillion off the market value.

The S&P/ASX 200 was down 3.35 per cent at 10.10am.

Although it's the first-ever trillion-dollar one-day loss, it does not make the top 10 greatest percentage losses. On "Black Monday", October 19, 1987, the Dow dropped by 22.61 per cent.

Mr Rudd said he had spoken to British Prime Minister Gordon Brown this morning after the US House of Representatives rejected the financial package overnight, sending the Dow into freefall.

"We are now in touch with all of our counterparts in the United States from the Australian point of view, a British point of view and the Europeans are doing the same," he said.

Treasurer Wayne Swan said the fallout could have an impact on interest rates in Australia.

"There's no doubt that events in the United States will probably put further upward pressure on borrowings but we'll just have to wait and see," Mr Swan said today.

He would not commit to the Reserve Bank of Australia intervening in local markets today and went on to repeat his belief that Australia was in a much better position than the US because of tighter regulations.

"There's a world of difference between what's going on in the United States and Australia," Mr Swan said.

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Desperate to avert a financial meltdown not seen since the Great Depression, world banks pumped an extra $A225billion into markets last night in a bid to shore up the international trading system.

As the worldwide credit crunch sparked a $29 billion rout at the Australian Stock Exchange yesterday, last night's extraordinary international rescue bid seemed to stop the downward spiral in Europe. Three days of losses were finally halted in early afternoon trading.

Analysts said the gains in European markets were largely the result of the massive cash injection.

The unprecedented concerted action by central banks in the US, Europe, Britain, Japan, Switzerland and Canada to staunch the bleeding saw the provision of a $US180billion cash line through currency swaps.

In Australia, the Reserve Bank has now pumped $11billion into the market, but there are fears over the health of the country's largest investment bank, Macquarie Bank.

Responding to the credit crisis yesterday, Australian investors retreated to the safe haven of gold the precious metal posting its biggest one-day price rise in nine years. Gold futures for December delivery put on $US70 an ounce, to end at $US850.50 an ounce.

With the bail-out of insurance giant American International Group failing to calm the storm affecting world markets, the benchmark S&P/ASX200 slumped by 114.9 points or 2.43 per cent over fears the crisis on Wall Street would continue.

An adverse ratings outlook by Standard and Poor's saw shares in Macquarie Bank slump to a near 512-year low of more than 23 per cent to $26.05, leading some analysts to question the viability of its business model.

Stocks in the US fell nearly 5 per cent and US financial stocks lost nearly 9 per cent.

Uncertainty about the Australian bank BankWest continued as its owner, Britain's largest mortgage lender, HBOS, said it would be sold to Lloyds TSB for $28billion.

And reports suggested last night the credit crisis may have claimed a new victim, with investment bank Morgan Stanley looking for help.

Prime Minister Kevin Rudd and Treasurer Wayne Swan reiterated yesterday that the Australian financial institutions were in a superior position to their international counterparts.

''The advice of the regulators is still that Australia's financial institutions are in sound shape, that the order of their balance sheets is strong,'' Mr Rudd said.

Mr Swan said Australia's largest four banks were among only 12 of the world's top 100 banks with an AA credit rating or more.

But Mr Rudd was forced to defend his decision to head to New York next week amid growing concerns about how shockwaves from the global credit crisis will reverberate in Australia.

The Opposition accused Mr Rudd yesterday of neglecting the country.

Liberal Senator Bill Heffernan listed 16 countries Mr Rudd had visited during his time in office, sparking a spirited defence from Government Senate leader Chris Evans, who said Mr Rudd was promoting Australia's interests abroad.

Mr Rudd said last night it was more important than ever for him to build relationships with crucial overseas players.

He met key officials including US Federal Reserve Board chairman Ben Bernanke, US Treasury Secretary Henry Paulson , World Bank president Robert Zoellick and International Monetary Fund head Dominique Strauss-Kahn during a visit to the US in March. ''I had a deep sense then that these relationships were going to be critical as the year unfolded,'' he said.

''I have been on the phone and had other meetings with a number of these individuals since then and it's very important that those discussions be renewed and there are concrete practical reasons for it.''

Mr Rudd accused new Opposition leader Malcolm Turnbull earlier in Parliament of talking down the economy. Mr Turnbull said yesterday he would not quite use the same terminology as the Reserve Bank governor, who had previously said ''... conditions in Australian banks are light years away from what's happening in other banking systems around the world''.

''The world is a much more connected place than that,'' Mr Turnbull said.

Positive news came with the issuing of figures yesterday showing Australian banks continued to have a low exposure to bad debt.

Reserve Bank figures showed the bad loans ratio of Australian banks at only 0.36 per cent in the June quarter, well below the decade average of 0.44 per cent. But the latest ACCI Westpac survey of industrial trends showed slowing job creation and confidence slipping to its lowest level in five years, prompting the Chamber of Commerce to call for further Reserve Bank rate cuts.

Share market monstered in minutes

About $35 billion was wiped off the Australian share market in the first 10 minutes of trading.

The Australian stock market plummeted more than 3% after National Australia Bank took an additional provision of $830 million on its exposure to the US credit crisis.

The bank's shares fell as much as 13% in early trading, and it is on track to record its worst day of trading in seven years.

Bell Potter senior adviser Stuart Smith said the US had led the local market lower.

"The US was down considerably and we really did follow their lead,'' Mr Smith said.

"Obviously the market didn't like NAB's provision but we should have known that was coming.''

NAB debt provisions cause shares to tumble

The National Australia Bank has made provisions for a possible loss of $830 million on debt-related investments because of the global credit crunch and the slump in the United States housing market.

That is on top of $181 million NAB has already set aside to cover risky investments.

NAB chief executive John Stewart says losses are likely because of a rapid increase in mortgage defaults.

"Unfortunately the behaviour of the housing market in the US leads us to believe that the worst case scenario may not be too far away from the most likely scenario," he said.

"Now we see our dividend being unaffected by today's announcement and our capital position remains strong."

The announcement of the provisions means NAB shares dived more than 12 per cent in early trade, as sentiment worsened in an already nervous market.

Even before NAB's announcement, Australian shares were in for a rocky ride after steep falls on Wall Street overnight.

The falls were sparked by figures showing US home sales have slumped to a 10-year low and Ford's record quarterly loss of $US9.1 billion.

By 12:00pm AEST, the Dow Jones Industrial Average had plunged 2.4 per cent.

Other banks followed NAB's lead, dragging the ASX 200 3.2 per cent lower to 4,978 and the All Ordinaries index down 150 points to 5,039.

The Australian dollar was worth 95.64 US cents.