Australia Stocks Drop on Global Slowdown Concerns; Banks Fall

By Shani Raja

Sept. 23 (Bloomberg) -- Australian stocks fell on concern the U.S. Treasury's plan to buy toxic mortgage assets won't prevent a recession and that rising oil prices will deepen a global economic slowdown.

Macquarie Group Ltd., Australia's largest investment bank, slumped 5 percent, and National Australia Bank Ltd., the nation's largest lender, fell 2.7 percent.

``Armageddon may have been avoided but there's a realization a couple of years of judgment are still to come,'' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which manages about $128 billion.

Australia's benchmark S&P/ASX 200 Index dropped 96.80, or 1.9 percent, to 4,923.70, extending its decline from a Nov. 1, 2007, high to 28 percent.

Financial companies led Australia's All Ordinaries Index to the biggest gain in 21 years in the past two days after regulators banned short selling and the U.S. government proposed a $700 billion plan to avert a financial meltdown. The U.S. Standard & Poor's 500 Index yesterday lost 3.8 percent on concern consumer debt levels and falling employment will crimp growth, while crude oil surged 17 percent, its biggest gain ever.

``The bailout gave the U.S. financial system a cardiac jolt that will prevent it from collapsing, but the economy is still in intensive care,'' said Prasad Patkar, who helps manage the equivalent of $1.8 billion at Platypus Asset Management in Sydney. ``It'll take some time for improved growth to become evident.''

Gold mining companies were among the benchmark's biggest gainers after gold futures rose 5.1 percent to $909 as investors bought the metal as a haven from market turmoil.

Newcrest Mining Ltd., Australia's largest producer of the precious metal, surged A$1.81, or 7.1 percent, to A$27.31, the highest in almost a month, while Lihir Gold Ltd. was the benchmark's best performer, jumping 20 cents, or 7.6 percent, to A$2.85, the highest in almost two months.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net