Markets crash into bear territory

Australian sharemarkets have today experienced their single biggest fall since the sub-prime crisis began in November 2007.

After tumbling more than 100 points in the opening ten minutes of trading, the S&P/ASX 200 has continued to fall at a steady rate throughout the day to close at 5186.8, a whopping 7.1% down on yesterday’s close.

The fall means Australian markets are now officially well into in bear territory, having dropped more than 20% in value since the most recent highs on 1 November 2007.

Today’s panic selling will add to the more than $180 billion in lost value already suffered by investors since the credit crunch began.

There does not appear to be a single major catalyst behind today’s falls, with US markets closed on Monday because of a public holiday. However European markets all dropped significantly overnight, with the British FTSE 100 dropping 5.5%, its worst single day of losses since 11 September 2001.

Analysts also suggest that significant margin selling – contracts that cause stocks to automatically be sold when they fall to pre-determined low levels – could be a major contributor to plummeting share prices.

Shares in the banks and financial sector stocks have been hardest hit, but miners such as Rio Tinto and Newcrest have also suffered major share price losses.