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Global sharemarkets plunge -

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ELEANOR HALL: The sharemarket mauling in the United States has spread to Australia.

Another spike in the crude oil price and more evidence that the credit crisis still has a long way
to run threw Wall Street into freefall overnight.

The Dow Jones Industrial Average plunged more than three per cent to its worst close in 21 months
as oil crossed a new psychological threshold of $US 140 a barrel and investors were urged to sell
banking stocks.

Now the bears are growling on sharemarkets around the world with similar heavy falls across Europe,
and here in Australia, few stocks have been spared, as business editor Peter Ryan reports.

(Sound of the Wall Street bell)

PETER RYAN: By today's close, Wall Street was limping from an oil and fear inspired bloodbath.
After plunging three per cent or a whopping 358 points, the Dow Jones Industrial Average ended its
worst day in 21 months, surpassing any subprime related fallout to date.

But the history making doesn't stop there, with today's losses adding to the worst June on Wall
Street since 1930 when during the Great Depression, stocks tumbled 18 per cent over the month.

Once again the big factor was oil which surged $5 to a new record of $US 140.39 a barrel when the
president of OPEC said $170 a barrel might only be months away.

And that has economists like Hugh Johnson of Johnson Illington Advisors, more than a bit worried.

HUGH JOHNSON: Obviously that's going to have an impact on the economy. It's starting to get near
the record levels of 1980 as a percentage of the economy and that had a big impact on the economy
in 1980. So oil's a problem.

PETER RYAN: The OPEC predictions were complicated when Libya threatened to cut output, because of a
US law that allows terror victims to seize assets of foreign governments.

SHOKRI GHANEM: This is creating uncertainty for us. There is even a threat that our money could be
even frozen.

PETER RYAN: Shokri Ghanem is president of Libya's National Oil Corporation and he says the United
States is contributing to its own supply problems.

SHOKRI GHANEM: So why should you produce oil and put it in a bank to be frozen? We hope that we
will not reach that point, but of course, you know, we think this is one of the reasons of creating
the uncertainty in the market.

PETER RYAN: Although cheap by world standards, Americans believes four dollars a gallon is highway
robbery. But economists say seven dollars a gallon for the fuel guzzling nation is now real
possibility.

JEFF RUBIN: Supply globally is not growing and the world has never been thirstier for oil.

PETER RYAN: Jeff Rubin, chief economist at CIBC World Markets, says lifestyle changes in the United
States are not enough.

JEFF RUBIN: Despite the sacrifices that people are making, despite the fact that people are
economising on their oil consumption, that means a negligible difference to world demand.

PETER RYAN: Today's other cause for panic came from the Wall Street investment bank, Goldman Sachs.
It cut its second quarter outlook for the world's biggest bank Citigroup, saying it has another
$8.9-billion in additional subprime write-downs ahead. That's on top of a $44-billion hit over the
past year from its exposure to subprime assets.

Another subprime victim, Merrill Lynch, was also downgraded by Goldman Sachs, along with the
automotive giant General Motors which now has a share price at its lowest since 1946.

Dr Ed Morse, chief energy economist at Lehman Brothers, says contagion has taken hold of hearts and
minds.

ED MORSE: There's a momentum in the investment community that makes it sort of a herd-like response
or herd-like mentality that helps to create a self-fulfilling prophesy.

PETER RYAN: As predicted the Wall Street carnage spread to Australia, where the key market
indicator, the All Ordinaries Index, fell as much as 2.8 per cent this morning while the benchmark
ASX 200 was down three per cent at one point.

SAVANTH SEBASTAIN: Really it's across all industries that we are seeing the weakness.

PETER RYAN: Savanth Sebastain, an equites economist at Commsec, says the dire predictions of more
subprime write-downs in the United States rattled Australian banks.

SAVANTH SEBESTAIN: And its reverberated fears about out banks locally as well. We've seen the
National Australia Bank currently down about 5.5 per cent, we've got ANZ down four per cent, and St
George also are weaker by about 3.5 per cent so they are certainly leading the declines in the
financial sector.

We've got the resources sector not doing too well despite the fact that we had base metal prices
rally on the back of the weaker US dollar overnight. BHP is down three-and-a-third per cent, the
other big miner, Rio Tinto, is down three-and-two-thirds of a per cent. So the weakness certainly
is all around.

PETER RYAN: But in the bloodbath, there are some winners. The oil companies Woodside and Santos are
around two per cent higher today as they wallow in the higher oil price.

ELEANOR HALL: Business editor Peter Ryan.