AUSTRALIAN stocks moved deeper into the red this afternoon after Japanese shares hit a 26-year low before going back to black.
The benchmark S&P/ASX 200 Index was down 66 points, or 1.7 per cent, at 3803.4 in early afternoon trade, off its morning low of 3761.1.
The broader All Ordinaries was lower by 57.2 points at 3774.4.
Australian shares are at their lowest level in four years.
Japan’s Nikkei 225 fell more than 2 per cent at the open to the lowest level since November 1982, before returning to positive territory.
The Nikkei was up 30.1 points (0.4 per cent) at 7679.2 this afternoon.
Investors had been concerned that the strong yen would cripple export earnings.
Elsewhere in the currency market, the Australian dollar moved back above US62c this afternoon - after falling as low as US61.34c in early trade - compared with Friday’s close of US63.88c when commodity prices fell further.
The yen has almost doubled against the Australian dollar in recent months and is at a 13-year high against the US dollar, as investors switch back into low-risk currencies amid fears that the global economy is heading for recession.
The falls in Japanese and Australian shares followed heavy selling in the US and European markets on Friday night amid growing evidence the world is sliding into recession.
In Australia, the financial sector was the biggest drag on the market, with GPT Group down 43 cents (37.4 per cent) at 72c and the big four banks lower by between 1.9 per cent and 3.3 per cent.
Colonial First State head of investment markets research Hans Kunnen said: “When you get a 3 per cent move on the Dow, we are not immune to that.”
Mr Kunnen said the freezing of managed investment funds in Australia had exacerbated the negative sentiment in the market.
“These things add to the consternation in the market,” Mr Kunnen said.
Colonial First State today joined the growing list of fund managers to suspend withdrawals from some of its funds after the federal Government’s move to guarantee all bank deposits triggered massive withdrawals from managed investment funds.
It wasn’t all bad news.
Mr Kunnen said that some companies with US earnings had been assisted by the fall in the Australian dollar.
Westfield Group, which owns shopping centres in the US, was up $1 (7.5 per cent) at $14.34, BHP Billiton was higher by 44c (1.8 per cent) at $24.82 and Rio Tinto was up $1.71 (2.7 per cent) at $65.81.
Gold shares were higher after the spot gold price bounced $US5.6 to $US740.35. Lihir Gold was up 11c (7.2 per cent) at $1.64 and Newcrest Mining was higher by 51c (2.9 per cent) at $17.96.
