The Aussie stockmarket will dip into correction territory this morning, if the 110 point, 2% plus fall in the share futures market on Friday night is any guide.
The NZ and Australian markets will be the first to feel the heat from Friday night’s big sell off in US and European markets, so the local losses will be heavy.
After the big sell-offs on Thursday and Friday of last week, the ASX 200 was down 2.7% for the week and around 8.5% for the month so far.
The share futures contract has the local market down 110 points – around 2.1%, which would top the 1.7% slide on Thursday.
Around $120 billion in value has been wiped off the value of the ASX 200 so far this month and a fall of 2% or more today would easily push that to close to $150 billion.
By the close of trade on Friday ASX 200 had lost 74 points, 1.4%, for the day, and by 2.7% for the week, to close at 5214.6.
The All Ordinaries index was down 1.3% for the day for and 2.5% for the week to close at 5224.8. The local sharemarket is now trading at levels last seen in December 2014.
This sell-off is a reaction to what is happening offshore, not here where the sluggish June 30 profit reporting season remains a worry.
For the week US shares fell 5.8%, Eurozone shares lost 6.7%, Japanese shares fell 5.3%, Australian shares fell 2.7% and Chinese shares lost a massive 11.5% and remains the black hole.
Oil and metal prices remain under pressure and bonds benefitted from safe haven demand.
From their highs earlier this year US shares have now lost 7.5%, Japanese shares are down 7%, Australian shares are down 13%, Eurozone shares are down 14%, Asian shares have lost 20% and Chinese shares are down a huge 32%.
The AMP’s chief economist, Dr Shane Oliver says that “With US shares only having just broken down technically they likely have more short term catch up ahead”.
Plenty of analysts and strategists are saying that this is a one-off correction and that the bull market remains intact.
Others a bit more wiser are advising their clients to be very, very cautious and watch what happens in countries like China (the single biggest influence on many of the US markets growth companies, especially Apple).
For the first time in seven years and more, this round of market jitters is not being driven by fears about the health of banks and other financial groups in the US and Europe.
But it will pay to keep a close eye on the health of banks in emerging markets such as China, plus the state of the Chinese stockmarket. They might be better indicators at the moment.
On Friday night, the Dow plummeted 530.94 points, or 3.1%, to close at 16,459.75, leaving the index down more than 10% from its record close in May, and therefore in a technical correction.
The index’s 5.8% drop over the week was the largest fall since September 2011, according to FactSet data.
The S&P 500 lost 64.84 points, or 3.2%, to settle at 1,970.89, and below the 2,000 level for the first time since February. The index was also down 5.8% over the week. The S&P 500 wiped out $US1.1 trillion of its market value over the week.
And the Nasdaq Composite lost a huge 171.45 points, or 3.5%, to 4,706.04 for a weekly drop of 6.8%, the biggest weekly fall since August 2011, and one driven by selling in some of those big tech stocks led by Apple, Amazon, Netflix, Twitter and Facebook.
Selling pressure was driven by the weak factor data from China, which resulted in a rout of Asian and European markets as well as a another slide plunge in oil prices.
Earlier, the selling wave pushed the Stoxx Europe 600 index down, the main measure across all major European shares into correction territory.
Friday’s 3.3% drop on Friday took its fall from its recent August high to over 10%.
And the MSCI Emerging Market index fell 5.9% last week after a fall of 2.2% on Friday dragged it deeper into correction territory.
The main drivers were the big losses in markets in China, Russia, Brazil, Mexico, Turkey and South Africa.
