Australian Stocks Drop to Three-Year Low; Banks, BHP Decline

By Shani Raja

Oct. 7 (Bloomberg) -- Australian stocks fell to a 3-year low as widening bank bailouts in Europe intensified fears of a prolonged global recession and commodity shares followed slumping oil and metals prices lower.

National Australia Bank Ltd., the nation's largest lender, dropped 3.7 percent, leading declines among financial companies. BHP Billiton Ltd. declined to its lowest since May 2007 after a measure of six metals plunged 5.8 percent in London. Woodside Petroleum Ltd. slumped 5.5 percent after crude oil fell 6.5 percent to $87.81 a barrel in New York.

``The fear that most major economies are going into recession hasn't abated,'' said Jason Teh, who helps manage $5.7 billion at Investors Mutual Ltd. in Sydney. ``The banking system may be safe, but I'm not so sure about the consumer.''

The S&P/ASX 200 Index fell 2.5 percent to 4,426 at 10:30 a.m. in Sydney, the lowest since Oct. 28, 2005, and the fourth straight decline. The index has lost almost a third of its value this year amid a credit freeze triggered by the U.S. subprime mortgage crisis.

Equities fell worldwide yesterday after the German government was forced to bail out Hypo Real Estate Holding AG, overshadowing the $700 billion U.S. Treasury plan to revive credit markets. The sell-off erased about $2.2 trillion from global equities.

The Dow Jones Industrial Average lost 3.6 percent to below 10,000 for the first time in four years, while European stocks tumbled, sending the Dow Jones Stoxx 600 Index to its steepest drop since 1987.

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