Australian stock market Crashes - Loses $25b

The market lost $25 billion today, reflecting more than a 2 per cent drop in New York on Friday.

The All Ordinaries Index dropped 106 points to 5,949 and the ASX 200 slipped 100 points to 5,920.

On the Sydney Futures Exchange, the September share price index contract lost 89 points to 5887 on a volume of 17,254 contracts.

CommSec chief equities economist Craig James says the market is likely to be volatile for some time.

US markets in turmoil

US equity markets ended in turmoil on Friday, after a senior executive of mortgage underwriter Bear Stearns said that the "fixed income market turmoil was the worst in 22 years''.
US data also was on the weak side, with jobs figures fanning worries about the strength of the economy. 

"Investors are still unsure how many skeletons there are in the closet in the US sub-prime mortgage market," he said.

"Until they get certainty about the state of that market then we are going to see further jitters.

"We certainly saw that in terms of the Australian share market today, down in the order of 1.75 per cent."

It was a bad day for the banks.

Australia's biggest investment bank, Macquarie Bank, continued to be dragged down by concerns over the mortgage market in the United States.

It lost 6.6 per cent to $70.05.

Global investment company Babcock and Brown dropped about 4 per cent to $24.02.

The other major banks also dropped in value amid speculation the Reserve Bank will raise interest rates on Wednesday.

TheNational Australia Bank k shed 63 cents to $37.37 and the Commonwealth Bank slipped 51 cents to $52.80.