Our market tumbles on US economy shock

Signs that sub-prime woes in the US are beginning to undermine the wider economy caused Australian sharemarkets to dive this morning.

At 12.30pm, the S&P/ASX 200 is down 1.7% to 6172.1, much of which was lost in the first 10 minutes of trading.

The fall was triggered by lower-than-expected employment figures in the US on Friday. Payroll figures showed 4000 jobs were lost in the US in August, the first decline in employment since 2003. Most economists expected 100,000 jobs to be created, according to a Bloomberg survey conducted before the figures were released.

Australian markets are following losses in the US, where the Dow Jones Average fell 1.9% on announcement of the employment figures.

It is now likely the US Federal Reserve will drop interest rates by at least 0.25 basis points when it next meets in order to stave off the prospect of a recession.