Shares slide, bailout vote delayed, $A falls again: Economy roundup

A horror week for investors looks like ending on a low, with the Australian sharemarket slumping again this morning after the US House of Representatives vote on the US Government’s $US700 million bailout package was delayed.

A horror week for investors looks like ending on a low, with the Australian sharemarket slumping again this morning after the US House of Representatives vote on the US Government’s $US700 million bailout package was delayed.

The House, which dramatically rejected the bailout package earlier this week, is now expected to vote again tomorrow. Markets are praying the package, which will result in the US Government buying the bad debts of US banks, will be approved and some normality will return to global markets.

Wall Street fell sharply overnight as fears grow about the state of the US economy and how much the bailout package will actually help.

Australian regulators have their doubts too. In an interview with Business Spectator, RBA Assistant Governor Guy Debelle said the package might not be the “silver bullet” many hope.

“It may well mark the beginning of the end, but I don’t think that’s guaranteed.”

The Dow Jones Industrial Average fell 3.22%, while the Standard & Poor’s 500 Index slid 4.03%. The tech-focused Nasdaq Composite Index dropped 4.48% to three-and-a-half-year low.

The Australian market dived by more than 2% in the first hour of trade and the benchmark S&P/ASX200 index had fallen 94.4 points or 2% to 4666.7 points at 11:40am AEST.

As has been the case all week, financial and resources stocks were sold off this morning. Investors are becoming increasingly worried about the impact of the credit crisis on global economic growth. If growth falls, so will demand for resources and mining stocks.

One bright spot in all this gloom is the Australian dollar, which slipped to around US77c overnight and is now down a whopping 20% since the start of July. No doubt exporters are clinging to this bit of good news right now.