Can China save the day, instead of triggering another sell off?
In a dramatic turnaround on Wall Street, a solid opening gain overnight of around 2% unravelled in afternoon trading, then vanished in the last hour of trading.
Instead of following most markets in Asia (except China where Shanghai fell 7.6%), Europe (gains of 3% to more than 5%), Wall Street ended the day down 1.3% for the Dow and the key S&P 500.
It was a massive about face of more than 3.3% for the two main market indicators. And as if in sympathy, our market was up 50 points at one stage in overnight futures trading, but that vanished and the ASX 200 will start more than 1%, or 52 points lower this morning.
Gold fell by around $US14 an ounce to $US1,140 an ounce, US oil futures rose more than 3% at one stage to close to $US39.60 a barrel, but that was also helped by a weakening in the value of the dollar.
The Aussie dollar rose back over 72 US cents, then retreated to trade around $71.27 in early local trading this morning.
And all eyes will again be on the Shanghai market this morning (around 11 am or a bit earlier this morning) after the Chinese central bank cut interest rates for a 5th time since last November, and also reduced the loan asset reserve ratios to try and encourage more lending.
At the same time the central bank promised to provide enough liquidity (more than $US23 billion alone yesterday) to the financial system to avoid a spike in rates and to convince investors that there is no crisis.
The People’s Bank of China (PBOC) cut its one-year benchmark bank lending rate by 0.25% to 4.6%, cut one-year benchmark deposit rates by the same amount, and reduced reserve requirements 0.50% to 18% for most big banks and more for rural banks.
The late sell off on Wall Street came despite solid housing data and consumer confidence.
The S&P 500 turned big early gains into losses and closed down 25.59 points, or 1.4%, at 1,867.61. The index remains firmly in correction territory, having fallen 12% from its peak reached on May 21.
Marketwatch pointed out that on a percentage basis, Tuesday’s trading saw the largest swing in the index, before closing negative, since October 2008 during the financial crisis.
The Dow, which was up more than 400 points at one stage, ended with a loss of 204.91 points, or 1.3%, at 15,666.44. That 604 plus point slide from the day’s high was greater than Monday’s 588 point fall for the day.
And the tech-heavy Nasdaq Composite ended the day down 19.76 points, or 0.4% at 4,506.49.
