Something is happening on global markets – it’s hard to identify, but sentiment about the still strong US market us being undermined by nervy investors who at times seem to be jumping at shadows.
The Chinese and European economies have definitely weakened, the Japanese economy remains mixed, but for some reason the roll call of reasons for the continuing bout of market instability grows.
Wall Street fell heavily overnight, oil dropped, gold edged higher, and for local investors, the price of iron ore edged up to around $US78.90, which won’t be enough to steady frazzled nerves.
For local investors watch the banks here in trading today – they rebounded yesterday after smaller rises on Tuesday at the end of the September quarter.
They are considered to be ’safer’ investments for investors than many other Aussie dollar assets, but should they lose the gains today from earlier in the week, it will be a sign of how weak local confidence is in our market.
Riskier investments such as commodities are being abandoned, along with equities and bonds and other safe US currency investments are in demand.
It could be the approaching end of month Fed meeting and the ending of its quantitative easing, but it’s not the health of the US economy, despite some marginally weaker data overnight.
Fear levels are rising, and they are not linked to events in the Middle East or Ukraine.
Rising political tensions in Hong Kong have mixed with the continuing high levels of concern about the health of the Chinese economy (that’s a big factor in Australia), but local factors here such as weak data, are of marginal interest.
Some of these worries were ignored a month ago, some seem illogical, others are slowly growing in strength.
So for a third day in a row Wall Street sold off, key commodity prices again eased and US bond yields fell sharply to their lowest level in a month as these new fears emerged among investors large and small.
European markets also weakened, and apart from Australia’s rebound yesterday afternoon, Asian markets were also weak.
The Dow fell 238.19 points, or 1.4%, to 16,804.71. The index has risen or dropped by triple-digits in six out of past eight sessions. The Dow is down 2.75% from its record close set September 19.
The S&P 500 lost 26.13 points, or 1.3%, to end on 1,946.16, and the Nasdaq Composite shed 71.30 points, or 1.6%, to 4,422.09.
The most worrying feature of US trading overnight was the 1.5% plunge in the Russell 200 index which measures smaller companies, fell 1.5% to move into correction territory after peaking in March
The Aussie dollar remained over 87 US cents this morning, despite dipping lower yesterday morning after the weak August retail sales figures were released.
The local market will start down 35 points or so on the share price futures contract, after being down more than 50 points earlier this morning.
That means yesterday’s strong rebound will be for nothing after the sell off overnight.
The ASX 200 Index jumped 0.8% to 5334.1 points, while the All Ordinaries Index added 0.7% to 5334.5 points.
But the share futures trading showed a 50 point fall for the opening, which will be a big hit.
It was a positive start to October trading for the ASX 200 after it lost 5.9% in September, wiping out all of the gains for the first eight months of the year.
The big banks returned to the fore yesterday as the drivers of the market with the ANZ up 1.65%, the Commonwealth rising 1%, Westpac 1% as well while the NAB rose 0.9%. BHP rose 0.35%, but Rio Tinto fell half a per cent.
US oil futures for November delivery lost 43 cents, or 0.5%, to settle at $US90.73 a barrel on the New York Mercantile Exchange.
That was the lowest settlement for a major contract since April, 2013. That was a smaller loss than on Tuesday.
Futures prices for West Texas type crude fell a nasty 13% in the September quarter.
In London, November Brent type crude lost 51 cents, or 0.5%, to end at $US94.16 a barrel. That was Brent’s lowest settlement price since June, 2012. Brent had its steepest quarterly decline in two years on Tuesday.
Comex gold for December gained $3.90, or 0.3%, to settle $US1,215.50 an ounce.
Comex December silver rose 10 cents, or 0.6%, to $US17.48 an ounce. Comex copper for December delivery slipped 3 cents, or 1%, to $US3.03 a pound.
