Now for another ‘red’ start to the week on equity markets in Australia and Asia and it’s clear another week of big falls could be ahead.
Some markets in Europe have already dipped into correction territory, such as Germany’s Dax.
Another loss of 2% or so this week in Australia, after the 2.4% slide last week, and our market will be in correction territory.
The cumulative fall from its most recent peak in September was 7.8% at the close on Friday.
In fact the futures market shows another 38 point fall overnight Friday.
That was after the ASX 200 Index lost 2.1% to end on 5188.3 points on Friday.
Not even a rise in the price of iron ore back past the $US80 a tonne mark on Friday night, will change sentiment today at the start in Australia.
Iron ore rose 1.7% on Friday to $US80.40 a tonne, the highest for several weeks.
Offshore, US shares lost 3.1% last week, European shares, 4.4% and Japanese shares lost 2.6%.
From their highs last month US shares have fallen 5% and global shares are down 6% and if the Standard & Poor’s 500 Index falls 10% it will be the first correction in more than three years.
The AMP’s Dr Shane Oliver says the Australian share market "has effectively led the global share markets on the way down reflecting falling iron ore prices, fears about Australian banks needing to raise more capital and the tendency for foreign investors to stay away as the $A falls. Reflecting falling global inflation expectations and safe haven demand, bond yields generally fell."
The $US had a fall from overbought levels for much of last week, and this saw the Aussie dollar have a modest bounce, which reversed on Friday night. The Aussie dollar ended at 86.68 USc.
Commodity prices were mixed with oil prices down sharply, but metal prices up slightly.
Gold rose, then eased on Friday to finish at $US1,223 an ounce, but oil continued to weaken.
World oil prices are now down 20% since the problems in Iraq first hit the global headlines in June.
Friday saw another triple digit fall for the Dow, the third of the week. The Dow dropped 115 points, or 0.7%, to 16,544.10, and lost 2.7% over the week. The blue-chip index also turned negative for the year.
The tech-heavy Nasdaq Composite dropped 102 points, or 2.3%, to 4,276.24 and suffered its worst weekly decline since May 2012.
The growing doubts about tech stocks will be tested this week with some key companies reporting, including Google, Intel and AMD.
And the key S&P 500 fell 22 points, or 1.1%, to 1,906.13, losing 3.1% over the week, its biggest weekly drop since May 2012. US analysts said the benchmark index is a hair’s breadth away from undercutting its key support level.
The benchmark 10-year Treasury yield dropped 13 basis points on the week, its biggest drop since the week ended March 14. The yield fell another 4 basis points on Friday to 2.289%, the lowest close in 16 months.
Marketwatch.com points out that 10-year yield has plunged nearly 34 basis points since hitting a recent peak on September 18. That’s a big fall and has come despite continuing evidence the US economy is solid and growing well.
Eurozone shares fell to their lowest since late 2013.
In Asia, Hong Kong’s Hang Seng Index and Tokyo’s Nikkei Average fell 1.9% and 1.2%, respectively, while the Aussie market plunged a nasty 2.1% on Friday.
Watch the banks in Australia this week.
The Commonwealth Bank fell 2.4% last week to $74.80 on Friday. Westpac and ANZ closed 1% and 1.3% lower at $32.25 and $31.22 respectively.
And the NAB fell 3.2% to $31.92 for the week after it forecast on Thursday a 14% fall in full-year cash profit because of $1.34 billion in write-downs, mainly from its British operations.
The great run in bank shares over the past two has ended, now for a long period or re-evaluation.
The Chinese trade data later today will test the share prices of big miners, such as BHP which fell 3.4% to $32.31, while Rio Tinto finished the week down 3% to $57.26. It will be tested by the release of its third quarter production and sales report on Wednesday.
