[NYTr] Crashing Economy: Australian stocks take $53 billion plunge

[All the News That Doesn't Fit]

sent by Dave Muller -southnews

Reuters - Dec 17, 2007 [no URL provided]


Australian stocks take $53 billion plunge;

U.S. inflation fears startle tense share markets

The Australian share market closed at a three-month low today, plunging 
3.5 per cent on news that there has been another major Australian
victim of the US subprime crisis.

Retail property manager Centro announced it is struggling to refinance 
$1.3 billion in debt because of the global credit crunch and has 
downgraded its earning forecast by 14 per cent. Investors reacted
badly, wiping $53 billion off the value of local stocks.

                                ***

SINGAPORE - Asian share markets, already ragged after five months of 
turmoil, fell deeper on Monday as rising U.S. inflation and high oil 
prices fanned concerns the Federal Reserve may be unable to make deeper 
rate cuts to prevent a possible recession.

Japanese government bonds slipped and the dollar rose to a 2-month high 
on expectations of a slower pace of U.S. monetary easing. Crude oil 
prices also rose, supported by a U.S. winter storm and renewed tensions 
in the Middle East as Turkish planes bombed Kurdish rebels in northern
Iraq.

Shares fell across board with Australia's benchmark stock index nursing 
its worst daily percentage fall in four months.

European stock markets were also expected to suffer with financial 
bookmakers in London calling Britain's FTSE 100 <.FTSE>, Germany's Dax 
<.GDAXI> and France's CAC index <.FCHI> to open more than 1 percent
lower.

Since August, global financial markets have been rocked by a U.S. 
subprime mortgage crisis, which has dried up credit. Central banks 
around the world have been cutting rates and intervening in money 
markets to ease some of the worst strains in the financial system. But 
investors are still extremely nervous.

Australia's S&P/ASX 200 was among the worst affected stock markets,
with banks such as Macquarie sliding and property trust Centro tumbling
more than 70 percent after warning it was having trouble refinancing
$1.1 billion in debt.

"People are obviously very nervous about the effect the subprime things 
are having on the funding. Anything with a whiff of U.S. and exposure
to funding needs is being hammered," said Eric Betts, head of strategy
with Nomura Australia Ltd.

Tokyo's Nikkei <.N225> ended down 1.7 percent, while MSCI's measure of 
other Asia Pacific stocks <.MIAPJ0000PUS> shed 3 percent. The index is 
about 14 percent below its November 1 record high, but is still up by 
about a third as the year draws to a close. The gain is roughly the
same as MSCI's emerging market index <.MSCIEF> but more than triple the
rise for MSCI's main world stock index <.MIWD00000PUS>.

South Korea's KOSPI <.KS11> index shed 3 percent to end at a 3-week
low. Taiwan's benchmark index <.TWII> lost 3.5 percent at a 9-months
low, while Singapore's Straits Times <.STI> and Hong Kong's Hang Seng
<.HSI>, fell about 2.5 percent each.

Housing data this week and earnings from three of Wall Street's biggest 
investment banks and brokerage firms, including Goldman Sachs , will 
keep investors on the edge of their seats.

OIL FIRMS

Oil prices and agricultural commodities are trading near record highs, 
as is gold, a traditional hedge against inflation.

Crude oil prices rose for the first time in three days, halting a $3 
slump caused by fears that the economy of the world's top oil consumer 
is faltering.

U.S. light, sweet crude for January delivery, which expires on Tuesday, 
rose 48 cents to $91.75 a barrel.

Spot gold was volatile, rising towards $799 an ounce before slipping to 
trade around $793 as the stronger dollar capped gains.

The dollar hit a two-month high against a basket of currencies after 
Friday's strong U.S. inflation data prompted investors to see less 
chance of a rate cut at the central bank's next meeting in January.

U.S. consumer prices rose the most in more than two years in November.

The CPI data showed that "the Fed is walking a fine line between upside 
inflationary risks and a slowing economy," currency strategists at RBC 
Capital Markets said in a note to clients.

The dollar traded at 113.06 yen, near the five-week high of 113.60 yen 
it hit on Friday.

The euro was little changed from late U.S. trade on Friday at $1.4429.

In the Japanese bond market March 10-year futures fell 0.20 of a point 
to 136.26 <2JGBv1> by 0223 GMT, while the benchmark 10-year JGB yield 
rose 2.5 basis points to 1.570 percent, nearing a one-month high of 
1.585 percent struck last week.