Financial markets will have a very wary eye on China today after another nasty fall rattled investor confidence around the world.
Despite nonsense this morning in Australian media blaming the banks for yesterday’s 1.2% slide here, it was the 6% plus drop in China that did the damage – Australian shares merely reacted to the gathering slump in afternoon trading.
Markets around the world followed China lower, but despite that overnight punters reckon our market will bounce back this morning with a 14 point gain on the futures market. The Aussie dollar eased to around 73.40 US cents.
In New York, the Dow fell 33.84 points, or 0.19%, to 17,511.34, the S&P 500 shed 5.52 points, or 0.26%, to 2,096.92 and the Nasdaq Composite lost 32.35 points, or 0.64%, to 5,059.35.
Not helping sentiment in the US was an earnings downgrade from the world’s biggest retailer by sales, Walmart.
That shocked US investors and came despite another quarter of rebounding growth in the company’s key US domestic market.
Earlier, China’s main Shanghai Composite and Shenzhen 300 indexes both dropped more than 6% after regulators indicated the government would scale back on its support buying.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2% after hitting its lowest since July 2013. MSCI’s all-country world stock index lost 0.31%.
Britain’s FTSE 100 was off 0.4%, Germany’s DAX fell 0.2% and France’s CAC 40 dipped 0.3%. Japan’s Nikkei eased 0.3% and Australia slid 1.2%.
Copper in London and the US fell to new six year plus lows – the UK price slid under $US5,000 a tonne for the first time since 2009 in reaction to the Chinese sell off.
China’s after fall came after the Shanghai Composite edged back above the 4,000 point level (thought to be important for investor confidence), then tipped lower and kept falling until it closed down 6.2% at 3,748.2 points. The Shenzhen Composite ended 6.6% lower at 2,174.4.
It was the biggest one-day drop for Shanghai stocks since an 8.5% plunge on July 27, which was the index’s second-biggest one-day fall of the past 15 years. For Shenzhen stocks, it’s their biggest fall since a 7% fall on the same date, according to Reuters.
There was little on the economic front that to have troubled Chinese shares. Data showed prices for new homes in 70 Chinese cities fell 3.7% per cent in July from a year ago, the slowest rate of decline since December.
And the People’s Bank of China meanwhile kept the renminbi “fix” steady, but it did pump in more than $US18 billion into Chinese financial markets to make up for the draining of funds offshore.
But it was those comments that the state finance corp will start hauling back on its share buying activities that rattled investor confidence in China, especially in the big cap stocks. That in turn saw more than 1,000 stocks on the Shanghai market ended the day limit down (10%),
Oil futures fell then ended higher at $US42.35 on Nymex in New York, a rise of 1.15%, Brent oil also ended higher in London. Gold shed $US1 to $US1,117 an ounce.
But copper was the big loser, sliding to a more-than-six-year low on concerns over future Chinese demand.
In London copper a low of $US4,989 a tonne on the London Metal Exchange. That’s the lowest level since March 2009.
And in New York, Comex copper for September delivery lost 3 cents, or 1.5%, to $2.28.60 a pound, the lowest settlement price since July 2009.
