Leading Indicators Suggest Tuesday Will Be A Bad Day On Wall Street

Just a guess:

THE Australian share market had its worst day in a decade today, plunging over 7 per cent as investors panicked in the face of a looming US recession.

The benchmark S&P/ASX200 index suffered its biggest one day drop since October 28, 1997, falling 7.05 per cent to 5186.8 points.

The broader All Ordinaries index fell 7.26 per cent to 5222 points.

Panic, risk aversion and, increasingly, lenders' margin calls are behind the drop.

The benchmark S&P/ASX200 index is now down more than 20 per cent from its life high of 6851.5 reached in November 2007, indicating a slip into bear market territory.

A bear market is seen as a long period of falling prices marked by investor pessimism. It is often calculated as having begun when stocks fall 20 per cent from whatever peak they have hit during the recent cycle.

And the future is not bright in the world's biggest economy. While US markets were closed overnight for a holiday, US stock index futures were down sharply, suggesting investors were preparing to flee the US stock market when the market reopens later today.

With the Australian stock market in freefall today for the 12th consecutive day, the local stock market collapse is the longest losing streak since January 1982.

In Asia, investors too sold off stocks yesterday, carrying through from last week's concern on Wall Street that a $US150 billion ($174 billion) fiscal stimulus proposed by President George W. Bush would not be enough to stop a US recession.

To heighten fears of global financial doom, the IMF warned overnight the global financial outlook is dire.

The IMF Managing Director Dominique Strauss-Kahn said overnight all developed countries were suffering from the slowdown in the US putting the world economy in a serious situation.

And billionaire investor George Soros said the world was facing the worst financial crisis since World War Two and the US was threatened with recession, according to an interview with the Austrian daily Standard.

"The situation is much more serious than any other financial crisis since the end of World War Two," Mr Soros was quoted as saying overnight.

Those comments came after European stock markets fell sharply overnight and demand for safe-haven bonds and currencies soared on fears a US recession, prompted by last year’s sub-prime mortgage crisis.

European stock markets posted losses of more than 5 per cent in many centres. In London, the FTSE 100 index plunged 5.48 per cent to 5578.20 points, the largest one day loss since September 11.

In Paris, the CAC 40 index lost 6.83 per cent to 4744,45 points and in Frankfurt the DAX shed 7.16 per cent to 6790.19 points, also the biggest single-day losses since the September 11 terror attacks.

In Asian markets today, the losses are similarly steep. Japanese share prices tumbled 4.41 per cent in morning trade today, slipping below the key 13,000-point level for the first time since October 2005.

The Tokyo Stock Exchange's benchmark Nikkei-225 index was down 587.63 points at 12,738.31 by the end of the morning session.

Chinese share prices opened sharply lower in early trade today. The benchmark Shanghai Composite Index, which covers both A and B shares, tumbled 250.50 points to 4663.94.

The Shanghai A-share Index lost 262.84 points or 5.10 per cent to 4,894.60 points and the Shenzhen A-share Index fell 95.33 points or 6.25 per cent to 1428.85.