Wall Street had its biggest fall for four weeks overnight – but why?
Was it an upturn in tensions in the Middle East? Some traders blamed the biggest fall for a month on that factor.
But others reckoned it was early profit taking ahead of the end of the quarter next Monday (June 30).
The Dow lost 119 points to end 0.7% lower on 16,818.13, the S&P 500 shed 12.6 points, or 0.6%, and finished on 1,949.98, while the Nasdaq Composite ended the day down 18.32 points, or 0.4%, at 4,350.36.
Oil prices didn’t respond to the news from Syria and Iraq, so they weren’t the trigger for the sell off in the afternoon.
In fact US oil prices ended fractionally lower in New York and under $US106 a barrel. Gold though edged high – but not by much, a dollar to around $US1,329 an ounce just after 7 am.
In Europe there was nothing major – London fell while French and German markets were higher.
Perhaps the only interesting development was an 8% fall in the Dubai market which took the loss in the Middle East market to 20% and bear territory.
But you can’t really see a sharp fall in Dubai undermining confidence on Wall Street, can you? Was this linked to events in Iraq and Syria?
A key measure of stockmarket volatility rose on the news, but seeing oil and gold hardly moved (they usually are more sensitive to changes in volatility, or rises in the so-called ‘fear’ index), you’d have to doubt the Middle East story.
The US dollar did firm, which could account for the weakness in gold and oil.
As a result, our market will be down by close to 30 points – after spending a bit of time in the green in early trading. But reality caught up and the share futures contract dipped 27 points at 7 am.
The Aussie dollar was also sold off, falling to 93.69, from more than 94 US cents yesterday.
The drop of close to half a cent happened without any standout cause except the firmness in the greenback.
Yields on US sovereign debt eased with the 10 year security priced to yield just under 2.58%, a touch lower on the day.
So our market will start on a shaky note today after yesterday’s drop (other markets in Asia were higher).
The ASX 200 Index and the All Ordinaries Index each lost 0.4% to end on 5432.8 points and 5415.1 points respectively.
Some local brokers reckoned end of quarter, half year and financial year selling and profit taking was behind the fall.
Losses in the big four banks weighed stood out.
The Commonwealth Bank fell 0.3% to $81.58, while Westpac Banking Corporation shed 0.6% ending to $34.15.
The ANZ Banking slid 1.1% to $33.62, and National Australia Bank lost 0.8% to finish on $33.08.
BHP Billiton added 0.3% to $36.46, but Rio Tinto dropped 0.8% and closed on $59.53.
