Investors desert Australian stocks on global cuesOctober 6th, 2008 - 1:28 pm ICT by IANS
Sydney, Oct 6 (DPA) Australian stocks lost ground Monday following the heavy selloff last week on Wall Street.The benchmark ASX 200 gave up 155 points, or 3.3 percent, to close at 4,540. The rout took the index back to where it was in December 2005.
Shares fell across the board, with mining stocks hit hardest because the financial crisis is slowing economies around the world and crimping demand for raw materials.
A drop in commodity prices has had a knock-on effect on the Australian dollar, which on the cross rates has fallen to a two-year low of 75 US cents.
Just three months ago, the Aussie dollar was trading at close to parity with the US dollar. It has fallen so heavily because its fate is tied up with Australia’s crucial coal and iron ore exports.
When the Reserve Bank of Australia meets Tuesday, most analysts expect a rate cut, which would further discourage investors from holding the local currency.
While most economists are predicting a cut of one-quarter of a percentage point to 6.75 percent, in response to a slew of figures showing a slowing economy, some of them are even factoring in a 50-basis-point cut.
The central bank dropped rates last month for the first time in almost seven years.