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$35 billion wiped off market

The ASX has suffered its biggest fall since May 2012, with $35 billion wiped off the value of stocks. The benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) fell 2.3% to 4,980, while the broader All Ordinaries index also lost 2.3%.

Minutes from the US Federal Reserve’s January policy meeting suggested the central bank could be reconsidering its commitment to buying government bonds to boost the US economy. Some policymakers appear concerned that further purchases could trigger inflation or disrupt financial markets.

Well, those comments appear to have triggered a massive sell-off globally.

The Dow Jones Industrial Average lost 0.8%, while the S&P 500 lost 1.22% overnight, and the Australian and Asian markets followed suit.

After steep falls at the start of trade, the market kept sliding and we then received reports out of China suggesting the government has told local authorities to decisively curb real estate speculation, amid steps to cool their property market. That may have also triggered some panic selling, and pushed our market further down.

The big four banks, Rio Tinto Limited (ASX: RIO)BHP Billiton (ASX: BHP)Telstra Corporation (ASX: TLS) and Wesfarmers represent close to half the index, and with all of them deep in the red, it was never going to be easy for the index to recover.

Even the Australian dollar was hammered, falling more than one cent overnight, and currently buying US 102.4 cents.

Foolish takeaway

While we haven’t seen a fall this large since May last year, they were quite common in the years prior. Foolish investors with a longer-term outlook shouldn’t be too worried about days like today – in fact they may offer an opportunity to pick up some cheap stocks.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in BHP.

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