The Australian share market has been mauled today.
In what looks set to be another terrifying day for local investors, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has crashed 124 points, or 2.4%, to just 5,096 points. Many of the gains achieved over the last two days have now been erased with just four companies within the ASX 200 trading in the black (three of which have risen less than 1%).
Although Japan's Nikkei 225 index rose 7.7% overnight – its biggest one day gain since the 2008 financial crisis – the Australian market has instead followed the lead set by Wall Street. The Dow Jones plunged 1.5%, while the NASDAQ index fell 1.2% which coincided with a grim warning from Citi regarding the health of the global economy.
As highlighted by the Fairfax press, Citi's chief economist, Willem Buiter, estimates a 55% chance of a global recession in the next two years. At the same time, investors are still weighing up the strength of the Chinese economy and contemplating the chances of the US Federal Reserve hiking interest rates when it meets next week.
Closer to home, investors are also awaiting the latest employment figures from the Australian Bureau of Statistics, to be released at 11:30am this morning. While some economists expect the unemployment rate to rise, such a scenario could well force the Reserve Bank of Australia into another official interest rate cut when it meets next month.
With so much going on, it's easy to see why the market has become so anxious again.
Australia's biggest banks have played a key role in today's broad selloff. Australia and New Zealand Banking Group (ASX: ANZ) is down 3.1% while Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd. (ASX: NAB) and Westpac Banking Corp (ASX: WBC) are all down between 2.2% and 2.9%.
Meanwhile, BHP Billiton Limited (ASX: BHP) and Healthscope Ltd (ASX: HSO) are down 2.9% and 4.2% respectively, while Telstra Corporation Ltd (ASX: TLS) and Woodside Petroleum Limited (ASX: WPL) are trading 2.2% and 3.8% lower.
While there will be positive days in the weeks ahead, you should expect more volatility too. As terrifying as these days can be, investors need to ensure they remain calm and rational, and ultimately keep their emotions in check. After all, panicking is one of the quickest ways to lose money in these markets.
