Australia Stocks Tumble as Bailout Fails, Sparking Credit Fears

By Shani Raja

Sept. 30 (Bloomberg) -- Australian stocks and the local dollar tumbled on concern global credit markets will remain frozen after the U.S. House of Representatives rejected a $700 billion plan to rescue the financial system.

BHP Billiton Ltd., the world's largest mining company, dived 6.6 percent to its lowest price since January. Babcock & Brown Ltd., a manager of infrastructure assets, tumbled 16 percent. National Australia Bank Ltd. fell 5.3 percent, the most in almost two weeks.

The S&P/ASX 200 Index plunged 3.8 percent to 4,624.60 at 11:45 a.m. in Sydney, the most in eight months, and the Australian currency fell 2.1 percent. The index has tumbled 32 percent from its November 2007 record as global credit markets seized up amid the U.S. subprime mortgage crisis.

``Volatility in the market has been notched up to a new high,'' said Prasad Patkar, who helps manage $1.8 billion at Platypus Asset Management in Sydney. ``This package is critical and it seems to be getting bogged down for political reasons. Credit markets are dysfunctional at the moment and if they aren't normalized quickly, we have a serious problem.''

The Standard & Poor's 500 Index tumbled the most since the 1987 crash yesterday and the Dow Jones Industrial Average slid 778 points for its biggest point drop ever as $1.2 trillion in value was erased from American equities.

The Australian dollar fell 2.1 percent to 79.76 U.S. cents from 81.50 cents in late Asian trading yesterday. A measure of six metals traded on the London Metal Exchange dropped 4 percent. Zinc fell 4.4 percent, copper 4.9 percent and nickel 3.5 percent.

BHP fell A$2.25, or 6.6 percent, to A$31.99. Babcock & Brown dropped 37 cents, or 16 percent, to A$1.98. National Australia Bank declined A$1.35, or 5.3 percent, to A$24.34.

Crude Decline

Newcrest Mining Ltd., Australia's largest gold producer, was among the index's biggest gainers as investors sought a haven from financial market turmoil. Its shares rose 81 cents, or 2.9 percent, to A$28.85, the highest since Aug. 4.

Woodside Petroleum Ltd., operator of Australia's A$25 billion ($20 billion) North West Shelf liquefied natural gas venture, declined A$2.76, or 5.1 percent, to A$51.79, the most since Aug. 5. Santos Ltd., the nation's third-largest oil and gas producer, fell 54 cents, or 2.7 percent, to A$19.16.

Crude oil for November delivery fell $10.52, or 9.8 percent, to settle at $96.37 a barrel at 2:42 p.m. on the New York Mercantile Exchange. The drop was the biggest in percentage terms since Nov. 15, 2001.

Caltex Australia Ltd., the nation's biggest oil refiner, advanced 43 cents, or 3.5 percent, to A$12.62, after the decline in crude reduced its procurement costs.

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